EUR/GBP Exchange Rate Rises on Strength of Eurozone PMI Composite Data
The Euro to Pound (EUR/GBP) exchange rate edged higher today, with the pairing currently fluctuating around £0.888.
Today saw the release of the PMI Composite figure for August, which beat forecasts and rose from 51.6 to 51.9. Consequently, this buoyed confidence in the single currency as hopes grow for the bloc’s economic recovery in the months ahead.
Chris Williamson, the Chief Business Economist at IHS Markit, commented on the report:
‘Although the relative strength of the PMI data in July and August mean the autumn is likely to still see the economy rebound strongly from the collapse witnessed in the spring, the survey highlights how policymakers will need to remain focused firmly on sustaining the recovery as we head further into the year.’
EUR rose following news that France is outlining its €100 billion stimulus packaged to lift its economy out of recession.
Ludovic Subran, an economist at Allianz, commented:
‘It’s a sensible mixture of temporary boosts to call for by means of activity coverage and longer-term provide by means of funding.
‘Nevertheless it’s very French in how it tries to get to the bottom of the entirety in a single plan.’
Pound (GBP) Sinks as EU ‘Disappointed’ In Lack of Brexit Progress
GBP struggled today following comments from the EU’s Chief Negotiator, Michel Barnier. Mr Barnier said he was ‘worried and disappointed’ about a lack of progress in Brexit talks. As a result, this has sparked fears of a possible no-deal on December 31st this year.
Following Tuesday’s breakthrough informal meeting with David Frost, the UK’s Chief Negotiator, Mr. Barnier complained:
‘We didn’t see any change in the position of the UK, which is why I expressed publicly what I say, that I am worried and I am disappointed because, frankly speaking, we have moved, [and] shown in many issues real openness in the past months.’
In UK economic news, today saw the release of the final UK Markit Services PMI for August, which fell below consensus from 60.1 to 58.8. However, with Britain’s largest sector continuing to recover from the coronavirus pandemic, this sparked hopes for the nation’s economy.
Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, commented on the report:
‘As the UK economy continues to wake from its pandemic slumber, the services sector reported a higher than expected rise in new orders and at the strongest levels since December 2016.’
GBP investors will be awaiting today’s speech from Andrew Bailey, the Governor of the Bank of England (BoE). If he confirms fears of a grim outlook for the British economy, then we would see Sterling suffer.
EUR/GBP Outlook: Could Fears of a No-Deal Brexit Drag Down Sterling?
Euro (EUR) investors will be looking ahead to tomorrow’s German Factory Orders figure for July. If these fall below consensus, then we could see the EUR shed some of its gains.
Pound (GBP) traders will be awaiting tomorrow’s release of the UK Markit Construction PMI for August. Any improvement in the UK’s construction PMI would prove GBP-positive.
The EUR/GBP exchange rate will be driven by Brexit developments this week. If a no-deal appears more likely in December, we could see Sterling fall.