- Euro Pound Hits 0.9194 – Pound Euro Hits 1.0872
- Eurozone Markit Manufacturing PMI in line with Expectations – Euro Pound Stable
- UK Markit Manufacturing Beats Forecast – Pound Bolstered
- ECB Meeting on the Horizon – Euro Traders Wary
The Euro Pound exchange rate, despite edging closer to parity, has held its own this morning, stabilising in the wake of the latest run of Markit manufacturing PMI releases and the anticipation for next week’s European Central Bank (ECB) meeting.
The seasonally adjusted IHS Markit UK manufacturing PMI release rose to a four-month high of 56.9 over August, up from the revised 55.3 figure in the previous period and smashing the expected print of 55.
This was the steepest rise in pace of production in some seven months and resulted from a boost in new work received and accelerating employment growth – which is also right at the cusp of a three-year high.
Business optimism also demonstrated an improvement by hitting a three-month high in August, whilst input cost inflation jumped for the first time in some seven months.
This news assisted in steadying the Pound’s fall against the Euro.
Eurozone Markit PMI Meets Expectations, Euro Pound Unchanged
The Eurozone received a number of Markit PMI figures this morning, with the composite Euro Area manufacturing figure printing at 57.4 in August, in line with the forecast and above July’s 56.6. This reading matched June’s 74-month high, with the rebound fuelled by strong domestic demand and rising export orders.
Employment also jumped, whilst price pressures as a whole strengthened.
There was, however, some disappointment as business confidence was demonstrated to have fallen to eight-month lows. Nonetheless, it should be noted that, despite the fall, manufacturers within the Eurozone still maintain a positive outlook.
Ultimately this news helped to prevent Sterling from taking the upper hand today, though there remains room for further volatility as the trading week draws to a close, especially with soundbites from this week’s Brexit negotiations still being released.
EUR GBP Exchange Rate Forecast: ECB Meeting on the Horizon
Markets are currently preparing for next Thursday’s September ECB policy decision, wherein the ECB is expected to announce its plans regarding its quantitative easing scheme (QE).
According to a Reuters poll, the continued solid growth expressed by the Eurozone in the first half of this year is satisfactory enough to prompt many to call for the ECB to scale back its stimulus measures, particularly its use of quantitative easing (in the July meeting the ECB also asserted that the change to QE would occur ‘this Autumn’).
This news is somewhat at odds with the understanding that interest rates will very likely remain unchanged, as the Eurozone’s inflation, at 1.5%, still remains significantly below the 2% target.
Markets, however, do not like to be caught unaware, so in the build-up the Euro has become bearish, with many traders anxious about what could result from the meeting. This too has contributed to this Friday’s stabilisation within the EUR GBP pairing.