Eurozone data has been mixed today, but the headline CPI figures have disappointed, extending EUR GBP exchange rate losses.
- UPDATE: UK Manufacturing PMI Boosts Pound – Sector soars back into growth territory
- Euro weakened by CPI figures – Weakening price growth creates headache for ECB
- German unemployment falls – Joblessness remains at lowest level since reunification
- Pound advances on consumer confidence – Sentiment improves more-than-forecast
- Eurozone and UK PMIs tomorrow – EUR GBP exchange rate forecast to weaken if UK manufacturing PMI recovers
The Pound has been buoyed by better-than-expected consumer confidence figures which, amongst other things, have indicated that consumer spending will remain strong in the coming month despite Brexit-related uncertainty.
Euro Soft Ahead of Sparse Eurozone Data Day
The Euro is largely in positive territory across the board, making small advances after yesterday’s slump on worse-than-expected manufacturing PMIs. There is little data available today, although the docket has already opened negatively, with a 14.4k uptick in the number of Spanish people out of work. Finalised Italian GDP figures have proved mixed; the year-on-year growth rate slowed less-than-forecast to 0.8%, but the quarterly rate fell in line with predictions to show no expansion in the three months to June.
The EUR GBP exchange rate is currently trending below opening levels. The Euro has managed to hold Pound gains in check despite a bullish reading for the UK construction PMI, which rose far above the 46.5 forecast to end within touching distance of growth territory thanks to a 49.2 score. However, once the day’s disappointing US non-farm payrolls data was released, investors were ready to adjust their positions and a subsequent run on Sterling saw the Euro tumble.
(Last updated 16.10, 02/09/2016)
Strong UK Manufacturing Sector Growth Shocks Markets; Pound Rockets Up
The GBP EUR exchange rate bounced up to hit 1.1900 after the release of the latest Markit UK manufacturing PMI. Pound Sterling is still holding gains of around 0.9% after the index, which was forecast to edge higher to 49, but instead leapt from 48.3 to 53.3. According to Markit, the weak Sterling exchange rate, combined with a rise in demand, has helped the sector to bounce back from the initial referendum shock.
(Last updated 12.27, 01/09/2016)
Traders Await Eurozone PMIs; EUR GBP Weakens Ahead of Data Release
Finalised versions of the Eurozone PMIs for August are due imminently, keeping the Euro weak. Investors, still recovering from the shock of yesterday’s disappointing inflation data, are waiting to ensure that the latest readings do hold steady on previous estimates as forecast before adjusting their positions and beginning the day’s trading proper. As a result EUR GBP exchange rates are currently down -0.3% at 0.8473.
(Last updated 08.39, 01/09/2016)
Euro Downtrend Continues as Consumer Price Index Weakness Increases ECB Stimulus Odds
The latest Eurozone data has offered a mixed picture of the currency bloc’s economic health, although the most important data has disappointed. Unemployment in the Eurozone has remained at 10.1%, defying forecasts of a slip lower to 10%. Core CPI has weakened from 0.9% to 0.8% instead of holding steady, while non-core price growth has remained at 0.2% rather than the small uptick to 0.3% predicted.
Inflation data from Eurozone member states was also weak, with the French consumer price index for August weakening ten basis points instead of remaining at 0.3% on the year. Italian CPI remained in deflation on the year, while on the month price growth edged -0.1% lower to 0.2%.
Meanwhile data from Germany was largely positive. The number of people out of work fell by more than expected, dropping by -7,000 rather than the -5,000 forecast after last month’s -8,000 decline. The drop was not enough to lower the seasonally-adjusted unemployment rate from 6.1%, but this still meant the number of people out of work remained at its lowest since reunification.
German retail sales also saw a strong rise on the month, jumping from the previous contraction of -0.6% to 1.7%, significantly above the forecast growth of 0.5%. Year-on-year retail sales slumped much further than expected, dropping from 2.3% growth in June to a contraction of -1.5%. Growth of 0.3% had been forecast.
Today’s data comes after the European Central Bank’s (ECB) cut-off point for its policy meeting next week, so is unlikely to affect monetary stimulus this time round. However, it points to a continuing weakness in price growth is likely to create headaches for the Governing Council going forwards, weakening the Euro today on heightened bets of further stimulus measures. According to Capital Economics’ Stephen Brown;
‘The unemployment rate is well above its 1999 to 2007 average of 8.8%, indicating that there is a large amount of slack in the economy and suggesting that wage pressures will remain subdued. With yesterday’s survey data also pointing to a marked slowdown in growth ahead, there is a strong case for the ECB to announce further policy easing.’
Pound to Euro (GBP EUR) Bullish on Recovering UK Consumer Confidence
Today’s consumer confidence figures have helped allay fears sparked yesterday by markedly weakening consumer credit. After the initial strong hit to consumer sentiment following the outcome of the referendum, it seems UK consumers are continuing to shrug off Brexit-based uncertainties. The latest GfK survey index has climbed from -12 to -7, beating forecasts by one point.
According to Head of Market Dynamics at GfK Joe Staton;
‘We’re reporting some recovery in the Index this month as consumers settle into the new wait-and-see reality of a post-Brexit, pre-exit UK. The uptick in confidence is driven by good news from hard data, the combination of historic low interest rates matched with falling prices and high levels of employment. This can be seen in positive growth across all major measures including both our Personal and General Economic situation for the next 12-months.’
Further boosting sentiment is the fact that house prices have defied expectations of a fall to continue posting strong growth. According to Nationwide, house price growth accelerated on the month in August from 0.5% to 0.6% when a decline of -0.2% had been predicted. On an annualised basis, price growth rose from 5.2% to 5.6% despite a slowdown to 4.8% being on the cards. Nationwide have warned that the strong price growth is masking weakness in the sector, however, with falling demand matched by falling supply to keep prices buoyant for the moment.
Euro Pound (EUR GBP) Exchange Rate Forecast; Eurozone PMIs to Hold Steady, UK Manufacturing to Improve
With no data left for release today, the EUR GBP exchange rate is likely to continue weakening in response to the day’s CPI data. Tomorrow, a run of Eurozone PMIs could help restore some confidence in the Eurozone economy, with the manufacturing indices for all forecast to hold level. The weakest of these will be the French PMI; no change will leave the index in contraction territory at 48.5.
The UK’s only data tomorrow is also a Markit manufacturing PMI. The index is predicted to remain in negative territory, although a recovery from 48.2 to 49 is expected.
Current EUR, GBP Conversion Rates
The Euro Pound (EUR GBP) exchange rate is currently trending in the region of 0.8490, while the Pound Euro (GBP EUR) exchange rate is trading around 1.1779.