The Euro (EUR) exchange rate remained softer against the Pound (GBP) and US Dollar (USD) on Monday as data out of the Eurozone did little to ease fears over deflation and a slide towards recession. Further declines are forecast.
Early in the session an observer may have thought that things might be on the up for the Eurozone as data out of Spain showed that manufacturing activity in the nation expanded for an 11th consecutive month.
The Spanish PMI came in unchanged at 52.6 in October. Data then followed from Germany, which showed that factories in the Eurozone’s biggest economy saw an improvement in activity last month.
The German manufacturing PMI rose to a reading of 51.4, up from the 49.9 recorded in September.
Those positive reports were cancelled out however by more bad news from Italy and France. Italy’s PMI fell back into contraction territory to post a reading of 49.0 last month, a drop from the previous figure of 50.7.
France also saw its manufacturing shrink with its PMI coming in with a reading of 48.5. That contraction was sharper than the one seen in September.
The best performing Eurozone countries were Ireland with a PMI of 56.6, Netherlands with 53.0 and Spain with 52.6. Greece’s PMI fell to a two-month low but Austria was by far the worst performer with its PMI plummeting to a 24-month low of 46.9.
‘Manufacturing is unlikely to provide any meaningful boost to the currency union’s anaemic GDP growth. National growth disparities also remain a concern, as solid expansions in Ireland, the Netherlands and Spain provide a marked contrast to the downturns in Italy, Greece, France and Austria. The German industrial engine is also achieving only modest growth,’ said Rob Dobson, Senior Economist at Markit.
The overall Eurozone Manufacturing PMI inched up to 50.6, a slight improvement on the previous months figure but was below economist expectations for a rise to 50.7.
Euro Exchange Rate Forecast
Against the Pound, the Euro weakened sharply after a UK manufacturing PMI showed an unexpected improvement in October as strong domestic demand outweighed the fall in overseas demand. Sterling’s PMI increased to a reading of 53.2, from 51.6 and defied forecasts for a fall to 51.2. After the data was released, the Pound strengthened above the 1.28 level against the Euro.
The Pound is forecast to make further gains against the Euro on Tuesday and as the week progresses towards the Bank of England and European Central Bank policy meetings on Thursday.
Against the US Dollar, the Euro softened further as the US currency continues to find support from last week’s positive data releases and the diverging policy of the Federal Reserve to the European Central Bank. Whilst the Fed is getting closer to raising interest rates, the ECB is heading in the opposite direction.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.2506 ,
Euro,,British Pound,0.7815 ,
Euro,,Australian Dollar,1.4349 ,
Euro,,Canadian Dollar,1.4118 ,