GBP/EUR Newsflash: Pound Sterling Fluctuates against Euro After Eurozone Retail PMI
After sliding to 1.34 at the beginning of the week as the UK’s Services PMI fell short of forecasts, the Pound Sterling to Euro exchange rate hovered around the 1.35 level on Tuesday as investors responded to a mixed bag of European reports.
The first ecostat of the day, Germany’s Factory Orders, showed an unexpected month-on-month decline of -1.8% and an annual figure of 1.9%. Respective results of 0.5% and 5.6% had been forecast.
However, the nation’s Construction PMI increased from 50.3 to 52.4 in September while the Eurozone’s Retail PMI similarly improved from 51.4 to 51.9.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3530.
Earlier…
A combination of poor UK service sector data and the ongoing impact of Friday’s US Non-Farm Payrolls report saw the Pound Sterling to Euro (GBP/EUR) exchange rate hit a low of 1.3461 on Monday. The pairing last struck such levels back in May ahead of the UK general election.
GBP/EUR Exchange Rate News: Pound Sterling Declines against Euro on Revised 2016 BoE, Fed Rate Hike Bets
The Pound Sterling to Euro (GBP/EUR) exchange rate approached the weekend trading at its worst level since May as the common currency rallied across the board following the publication of the US Non-Farm Payrolls report.
With the jobs data surprising on all levels the US Dollar posted widespread losses. As the Euro to US Dollar (EUR/USD) exchange rate is traded more than any other, the ‘Greenback’s weakness led to common currency strength and the Euro was able to drive the Pound lower in spite of the UK publishing positive construction news.
The dismal US jobs report, detailing a far smaller-than-forecast increase in positions and stagnation in average earnings, led to some investors pushing back their expectations for the first revision of US borrowing costs.
As the Bank of England (BoE) isn’t expected to take action until after the Fed, this outcome saw UK rate hike forecasts pushed back even further into 2016 and the Pound softened as a result.
The GBP/EUR exchange rate fell to the 1.34 level on Monday, around ten cents lower than the multi-year high of 1.44 struck earlier in 2015.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Extends Advance after UK Services PMI Fails to Meet Predictions
The Euro to Pound Sterling (EUR/GBP) exchange rate initially extended previous gains on Monday as investors responded to a concerning UK Services PMI. The gauge of the UK’s most dominant sector printed at 53.3 in September, down from 55.6 in August and less than the 56.0 expected by economists.
As the data supports the case in favour of UK borrowing costs remaining lower for longer, the Pound dipped against peers like the Euro and US Dollar following its release.
Markit economist Chris Williamson offered this assessment of the situation; ‘At the moment, sustained strong hiring in services and construction suggests that companies are generally expecting the slowdown to be short-lived. But with the three PMI surveys collectively recording the weakest inflows of new business for two-and-a-half years, there’s a strong likelihood that the slowdown could intensify in coming months.’
The Euro to Pound Sterling (EUR/GBP) exchange rate achieved a high of 0.7423
However, EUR/GBP exchange rate gains were limited as the Eurozone published some disappointing ecostats of its own.
Final Services and Composite PMIs for Germany and the Eurozone as a whole were negatively revised, while the Sentix measure of Investor Confidence dropped to 11.7 in October from 13.6 in September. A slightly stronger figure of 11.8 had been forecast.
Additionally, retail sales in the Eurozone came in at 0.0% month-on-month in August, although the annual figure of 2.3% was more encouraging than expected.
BoE, ECB Policy Statements Predicted to Drive Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast
The Pound Sterling to Euro (GBP/EUR) exchange rate could recoup losses as the week progresses if upcoming ecostats for the currency bloc (like tomorrow’s German Factory Orders numbers) increase the odds of the European Central Bank (ECB) loosening fiscal policy in the near future.
The minutes from the last ECB policy meeting may also be illuminating, with any references to either lower borrowing costs or an expanded quantitative easing programme likely to have a negative impact on demand for the Euro.
In terms of UK news, investors will be focusing on the minutes from the Bank of England’s (BoE) upcoming gathering. While the BoE is highly unlikely to actually adjust fiscal policy at this juncture, it’s possible that the minutes may show that one or more members of the Monetary Policy Committee (MPC) voted in favour of higher interest rates. A 2-7 split vote would be Pound supportive, but if all nine members of the MPC voted to keep borrowing costs on hold demand for Sterling may falter towards the close of the week.
Other UK news to be aware of includes the nation’s Manufacturing/Industrial Production figures, Construction Output numbers and Trade Balance report.