The Euro to Pound (EUR/GBP) exchange rate weakened on Monday as data showed that the UK manufacturing sector strengthened unexpectedly last month as strong domestic demand countered the waning demand from the Eurozone.
The Euro to US Dollar (EUR/USD) exchange rate firmed, as traders were relieved that data out of the region could have been worse.
According to Markit, Manufacturing activity in the UK accelerated unexpectedly last month to the fastest pace in four months as domestic demand increased. The UK PMI rose to a reading of 53.3 in October, beating economist forecasts for a reading of 53.
Economists shrugged off other UK data, which showed that the number of new mortgages approved fell to a 16-month low of 59,426.
Pound Sterling to Euro Exchange (GBP/EUR) Rate Advances Back to 1.26
Manufacturing activity in the Eurozone meanwhile stalled in November as new orders declined by the fastest pace in 19 months despite prices and costs falling. The report also showed that factory activity in the Eurozone’s top three economies of Germany, Italy and France declined.
Manufacturing in Germany, the Eurozone’s largest economy contracted for the first time in 17-months and French production remained in contraction territory.
The final Eurozone PMI came in at 50.1, the lowest reading since June 2013 and was below an earlier flash reading of 50.4.
Any figure above 50 indicates growth whilst a number below indicates contraction.
‘The situation in the Euro area manufacturing is worse than previously thought… there is a risk that renewed rot is spreading across the region from the core,’ said Markit chief economist Chris Williamson.
Despite the poor data, the Euro edged higher against the US Dollar and other peers as economists were relieved that the data was not even worse.
‘Sterling has rallied this morning after a positive manufacturing PMI figure. With the Pound steady so far on the day, this latest data has helped bolster the currency against the US Dollar and many other currencies to start the week off.
However, the Euro has had an overall strong morning as well with final manufacturing PMI for the Eurozone showing only very slight growth at 50.1,’ said currency analyst Nicholas Ebisch.
The Euro is likely to come under increasing pressure as the European Central Bank’s (ECB) end of year rate decision and press conference approaches. The weak data adds to calls for policy makers to take more action to increase growth and tackle the threat of deflation.
Euro Exchange Rate News:
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