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Euro Pound (EUR/GBP) Exchange Rate Flat as Eurozone and UK Manufacturing PMIs Fail to Impress

EUR/GBP Exchange Rate Muted Following Lacklustre PMI Figures

The Euro Pound (EUR/GBP) exchange rate appears range bound this morning as some underwhelming PMI figures fail to elicit much response from markets ahead of the Bank of England’s (BoE) rate decision on Thursday.

At the time of writing, the EUR/GBP exchange rate is virtually unchanged from this morning’s starting rate, a trend likely to continue until tomorrow’s BoE policy statement.

Pound Sterling (GBP) Exchange Rate Static as UK Factory Activity Slows

The Pound (GBP) is trading narrowly against the Euro (EUR) and the majority of its other peers this morning as some weak manufacturing figures failed to move the currency ahead of tomorrow’s rate decision from the BoE.

According to data published by IHS Markit, the UK’s manufacturing PMI fell from 54.3 to 54.0 in July, the lowest reading since April and falling below forecasts of a more modest slide to 54.2.

The report attributed the weak result to a slowdown in both output and new orders, with weak domestic demand offsetting elevated export orders.

The data also suggests that the UK economy got off to a slow start in the third quarter, with the manufacturing sector’s contribution to GDP likely to remain negligible.

Rob Dobson, Director at IHS Markit, said:

‘UK manufacturing started the third quarter on a softer footing, with rates of expansion in output and new orders losing steam.

‘The upturn in the sector has eased noticeably since the back-end of 2017, meaning that manufacturing has failed to provide any meaningful boost to headline GDP growth through the year-so-far.’

Euro (EUR) Exchange Rate Struggles as Eurozone Manufacturing Underwhelms

At the same time IHS Markit also published July’s final Eurozone manufacturing PMI this morning, with a similarly underwhelming reading leaving the Euro (EUR) largely muted in trade on Wednesday.

While the Eurozone factory PMI actually edged higher later month, is failed to elicit much positivity from EUR investors, given it was still the second lowest reading since late 2016.

Analysts suggested the slowdown its likely tied to recent worries over trade, with optimism amongst manufacturers close to a two-year low.

EUR/GBP Exchange Rate Forecast: Dovish Rate Hike From the BoE to Weaken Sterling?

Looking ahead to the second half of the week, movement in the Euro Pound (EUR/GBP) exchange rate looks to be dominated by the Bank of England’s latest rate decision.

Economists widely forecast that this week’s policy meeting will result in the BoE voting to raise interest rates in August.

However while GBP investors are likely to welcome the decision, it may not necessarily be reflected by a rise in the Pound exchange rate.

Instead it is likely to be the bank’s forward guidance which has the greatest impact on Sterling, with expectations of a ‘one and done’ or ‘dovish’ hike likely to see the GBP exchange rate tumble on Thursday.

Meanwhile the Euro may tick higher at the tail end of this week’s session, thanks to an expected rebound in the Eurozone’s latest retail sales figures.