Euro pound (EUR/GBP) strengthens as Eurozone PMIs beat forecasts
The euro pound (EUR/GBP) exchange rate is gaining ground this morning as upbeat data from the Euro bloc lifts the common currency against its rivals.
At the time of writing the EUR/USD exchange rate is trading at £0.85749, up approximately 0.2% from this morning’s opening rate.
Euro (EUR) lifted by upbeat PMIs
The euro (EUR) is edging higher this morning following a better-than-forecast finalised PMI.
The Eurozone’s purchasing manager’s index printed at 51.5 in March, surpassing market expectations of 51.1 and rising from 50.2 in February.
Germany’s finalised services PMI also beat expectations, printing at 50.1 in March, unexpectedly breaking into expansion territory following six months of economic contraction in the vital sector.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented:
‘The service sector in the eurozone is gradually finding its footing, with activity stabilizing in February and showing signs of moderate growth in March. It’s particularly encouraging to note that new business has resumed growth after an eight-month dry spell. This favourable trend is expected to persist, fuelled by wage growth outpacing inflation, thus bolstering the purchasing power of households.’
Pound (GBP) slumps amid towering BoE rate cut bets
The pound (GBP) is on the defensive this morning amid surmounting Bank of England (BoE) interest rate cut expectations.
Markets are now pricing in four BoE interest rate cuts this year, with the likelihood of a June rate cut now standing at 75%. As such, ramped up rate cut speculations continue to pressure GBP exchange rates amid a lack of notable UK data.
James Smith, Developed Markets Economist at ING said:
‘We think a June rate cut is growing more likely but is far from guaranteed. Much hinges on April’s services inflation data which we think could come in above Bank of England forecasts and tempt the committee to wait a little longer before cutting rates. Whatever happens, we expect at least four rate cuts this year.’
Elsewhere, a lower-than-forecast finalised services PMI further limit’s Serling’a movements. The index printed at 53.1 in March, down from February’s 53.8 and below forecasts of 53.4. The data marked the third consecutive slowdown in services growth.
Euro pound exchange rate forecast: ECB minutes to sink the euro?
Looking ahead, the European Central Bank’s (ECB) March meeting minutes are due this afternoon. Should policymakers strike dovish, the euro could face headwinds. However, should policymakers convincingly dissent from the central bank’s dovish rhetoric, EUR may edge higher.
On Friday, the latest German factory orders are due for release. Economists expect to see a 0.8% expansion in February, following January’s weighty 11.3% contraction Should the data print as forecast, EUR could gain some ground amid signs of recovery in the industry-heavy German economy.
Also due out tomorrow is the Eurozone’s latest retail sales data, which is set to report a 0.4% decline in rerail activity throughout February. Should the data print as forecast, EUR may falter.
For Sterling, a data-light end to the week may see the increasingly risk-sensitive pound moved by shifting market sentiment. Cheery trade may lift GBP against its safer rivals.
