UK services PMI rises above expectations, signal fresh hopes for British economy

The United Kingdom May services purchasing managers’ index rose more than expected, rebounding from a three-year low in April which signaled increasing optimism over the health of the British economy. Services make up for almost 80 per cent of the total gross domestic product, data revealed Friday showed.

In a report, market research group Markit said the seasonally adjusted Markit/CIPS Services Purchasing Managers Index rose to 53.5 last month from a reading of 52.3 in April. Analysts had expected the index to rise to 52.5 in April. However, it remained well above the 50-point mark, indicating an expanding economy.

Despite the better-than-expected PMI figure, research group Markit has warned markets of a possible surprise following the June 23 Brexit referendum on the U.K.’s membership in the European Union.

Markit also highlighted that it was the slowest gain in new business in the 41-month growth sequence and that hiring was at a 33-month low.

GBP/USD was trading at 1.4426 from around 1.4432 ahead of the release of the data, while EUR/GBP was at 0.7725 from 0.7732 earlier.

Meanwhile, European stock markets traded higher, with London’s FTSE 100 gaining 0.83 percent. The EURO STOXX 50 rose 0.06 percent to 33.87, France's CAC 40 traded up 0.44 percent to 4,486.30, while Germany's DAX advanced 0.52 percent to 10,261.50.