ECB Vice President’s Outlook Triggers EUR/GBP Exchange Rate Rise
The Euro (EUR) has risen by an impressive 0.7% against the Pound (GBP) today, trading at a level of £0.9011.
This appreciation comes after supportive comments made by new European Central Bank (ECB) Vice President Luis de Guindos about Eurozone growth and inflation.
Mr de Guindos has forecast that the single currency bloc will continue to grow in the months ahead, while also predicting higher Eurozone inflation.
Both of these predictions have supported today’s EUR/GBP exchange rate rise, as Euro traders consider whether there could be an early 2019 ECB interest rate hike.
Mr de Guindos has not been entirely optimistic in his future forecast, but this hasn’t been enough to prevent a Euro to Pound Sterling rise today.
The ECB policymaker added that external threats could destabilise the Eurozone in the future, saying:
‘While risks surrounding the Euro area growth outlook remain broadly balanced, uncertainties emerging from increased global protectionism, the finalisation of the Brexit negotiations and vulnerabilities in emerging markets, have become more visible than a few months ago.’
UK Manufacturing PMI Decline Drags Pound to Euro (GBP/EUR) Exchange Rate Down
On the other side of the currency pairing, Pound Sterling (GBP) has struggled against the Euro (EUR) today because of disappointing manufacturing sector data.
This has triggered losses across the board in GBP exchange rates – against the Euro, the Pound is trading at a level of €1.1092.
August’s UK manufacturing PMI, the first of this week’s readings, has drained GBP trader confidence by revealing a moderate slowdown in sector activity.
The dip from 53.8 points to 52.8 was worse than forecast and has led to Markit Director Rob Dobson warning that:
‘The performance of the UK manufacturing sector looked increasingly lacklustre in August.
‘The headline PMI fell to its lowest level for over two years, as growth of output and new orders slowed and the pace of job creation slumped to near-stagnation.
‘Based on its historical relationship with official ONS data, the latest PMI report is broadly consistent with zero growth in manufacturing production, meaning the sector will likely fail to provide any support to the wider UK economy in the third quarter.’
Euro to Pound Sterling Exchange Rate Forecast: Are EUR/GBP Losses ahead on UK Services PMI?
The near-future could bring additional Euro to Pound (EUR/GBP) exchange rate gains, although further ahead there is a risk of losses for the single currency.
Tuesday will bring UK construction PMI data which is expected to show a slowdown; such a result could ensure continued EUR/GBP gains tomorrow.
Beyond Tuesday, however, the Pound could recover and rise against the Euro when Wednesday’s UK services PMI comes out.
This is a high-impact reading and is forecast to show growth during August; such a result could restore confidence among Pound traders and trigger a GBP/EUR rise.
Wednesday will also bring a Eurozone services PMI, although even if this grows it might not be enough to counteract the effects of a higher UK services reading.