UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.4% on Thursday morning.
Despite the fact that Halifax House Prices data bettered the market consensus, the Pound declined versus most of its currency rivals. This is mostly due to ongoing concern regarding the slower-than-abticipated pace of services output in December. The Euro, meanwhile, advanced versus its major peers despite a mixed-bag of domestic data results. Of particular positivity was the German Construction PMI and German Factory Orders which bettered the respective median market forecasts.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3515.
Yesterday…
GBP/EUR Exchange Rate Forecast to Trend within a limited Range after UK Composite PMI Ticks Lower
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a limited range on Wednesday morning.
British economic data disappointed on Wednesday. December’s Services PMI declined beyond expectations from 55.9 to 55.5. The services sector accounts for the largest portion of British Gross Domestic Product. The Pound avoided a larger depreciation, however, considering that services output was still robust in December. Although December’s UK Construction PMI bettered estimates, the combination of weaker-than-expected services and manufacturing output caused December’s Composite PMI to drop from 55.8 to 55.3.
In response to the services data, Chris Williamson, Chief Economist at Markit, stated; ‘The services sector remained the key driver of the UK’s economic upturn in December, helping to offset the recent weakness seen in manufacturing and putting the economy on the starting block for another year of 2-2.5% growth in 2016. The surveys point to the economy having grown 0.5% in the fourth quarter, a solid but perhaps unexciting pace that means GDP would have risen 2.2% in 2015.
Williamson added; ‘A rosy outlook is by no means assured, however. With business expectations about future workloads dropping to the lowest for almost three years, firms are becoming more cautious in the face of growing uncertainties. The cost impact of the Living Wage, government spending cuts, a potential hike in interest rates, global economic growth jitters and of course ‘Brexit’ are all weighing on business minds and pose significant downside risks to economic growth in 2016.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3660.
EUR/GBP Conversion Rate Predicted to Hold Steady on US Dollar Strength
After disappointing data out of China caused traders to seek safe-haven assets, demand for the US Dollar heightened. This caused the Euro to soften thanks to negative EUR/USD correlation as the world’s most traded currency pairing. Also weighing on demand for the single currency was a mixed-bag of domestic data results. Whilst Eurozone and German Services and Composite PMIs bettered the respective market consensuses, Italian and French data failed to impress. Of particular disappointment was the French Services PMI which dropped below the 50 mark that separates growth from contraction.
In response to the French services data, Jack Kennedy, Senior Economist at Markit, stated; ‘The French service sector broadly stagnated in December, ending a ten-month run of expanding activity. Anecdotal evidence suggested that a number of businesses continued to be affected by cancellations following the recent terrorist attacks, exerting a drag on new business growth. Correspondingly, business expectations dipped to the lowest level for over a year. Service providers responded by cutting their charges to the greatest extent in six months, which they will be hoping may spur new work intakes to get the New Year off to a more positive start.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3605 during Wednesday’s European session.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Trend Statically ahead of US Data
Although there is a complete absence of further European and British economic data to provoke volatility, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to see changes in response to US economic data. The ISM Non-Manufacturing Composite and the Federal Open Market Committee (FOMC) meeting minutes will be of particular significance given the market moving potential of these high impact US ecostats.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3661 during Wednesday’s European session.
