Homepage » News » EUR/GBP » Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: Eurozone Slowdown Worries Outweighed by Shortfall in UK Services PMI

Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: Eurozone Slowdown Worries Outweighed by Shortfall in UK Services PMI

Single Currency (EUR) Remains Buoyant Today Despite Declining German Factory Orders

In spite of German Factory Orders having printed at weaker levels than expected early on Tuesday the Euro (EUR) remains defiantly up against many of its rivals. With the Pound (GBP) remaining bearish in the wake of yesterday’s disappointing UK Services PMI the EUR/GBP exchange rate is currently trending in the region of 0.7398.

Earlier…

Although Eurozone data has remained dovish today the EUR/GBP currency pairing is on a fresh uptrend thanks to a disappointing UK Services PMI.

Improved UK Construction Output Failed to Spur Pound (GBP) to Significant Gains as Euro (EUR) rose on Reduced ‘Greenback’ (USD) Sentiment

Ahead of the weekend the EUR/GBP exchange rate saw a substantial spike in value thanks to the common currency’s (EUR) negative correlation with the ‘Greenback’ (USD). As the US Change in Non-Farm Payrolls clocked in significantly below forecast, at a dismal 142,000 new jobs rather than the expected 201,000, the odds of an imminent interest rate hike by the Fed were dialled back, reducing demand for the ‘Buck’. Given the high volume of EUR/USD trade, this saw the Euro uptrend across the board. However, as recent data releases from the Eurozone have been less than encouraging, these major gains were not long-lived.

In contrast the Pound (GBP) was somewhat buoyed by the publication of the UK Construction PMI for September, which bettered expectations to print at 59.9 instead of a more modest increase to 57.5. While this did demonstrate an undeniable uptick in the domestic economy, the fact that the construction sector accounts for only 7% of the nation’s GDP prevented this positive data from having a greater impact upon Sterling’s appeal to investors.

Weak UK Services PMI Leads to Decline in Demand for Sterling (GBP) to Support EUR/GBP Conversion Rate Uptrend Today

This morning has seen the recent trend of disappointing Eurozone figures continue, as the Services and Composite PMIs for the currency union have shown greater declines than anticipated. Growth in the service sector slowed from 54.4 to 53.7, another signal that the wider global slowdown is still influencing the local economy, which will no doubt spur further suggestions that the European Central Bank (ECB) may be forced to introduce fresh monetary loosening measures to support the single currency.

Counteracting the Pound positivity that had been building at the end of the last week, Monday’s UK Services PMI showed a decided downturn in sector growth. Printing at 53.3 rather than 55.6, the figure indicated that the domestic economy continues to suffer in spite of upbeat construction data. As services form the largest single contribution to UK GDP, this also doesn’t bode well for the longer term outlook of Sterling, spurring the EUR/GBP exchange rate still higher today.

EUR/GBP Exchange Rate Forecast: Single Currency Could Begin to Cede Ground Should Upcoming Retail PMIs Prove Uninspiring

The Euro will be hoping to make further gains on Tuesday’s German Factory Orders figures, as pundits expect a substantial improvement on the month from -0.6% to 5.6%, although another shortfall here could prompt a more decided downturn. Further Construction and Retail PMIs for the Eurozone nations will also be of note, as it does seem likely that these could also be the subject of fresh disappointment.

On the other hand, the UK will not be releasing any particularly significant economic statistics tomorrow, with Wednesday’s domestic Industrial and Manufacturing Production numbers likely to be the next major influence on the Pound. The NIESR Gross Domestic Product Estimate for September could also provoke movement for the EUR/GBP pairing, particularly should it prove a more hawkish reading.

Current EUR, GBP Exchange Rates

At time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7408, with the Pound Sterling to Euro (GBP/EUR) pairing in a downtrend at 1.3510.