EUR/GBP Exchange Rate Rangebound on Europe Economy Outlook
The Pound Euro (GBP/EUR) exchange rate held steady today, with the pairing currently trading around €1.157 after the German Manufacturing PMI for October remained in contraction territory at 42.1, leaving European markets jittery as the Eurozone’s largest economy continues to slow down.
Phil Smith, Principal Economist at IHS Markit, was downbeat in his analysis, saying:
‘The German manufacturing sector remains in recession and continues to pose a threat to the domestic economy through a rising number of factory job losses. Employment across the goods-producing sector is now falling at the fastest rate for the best part of ten years.’
The EUR/GBP exchange rate also struggled as German factory job losses continue to accelerate, with jobs slashed at their fastest rate in almost 10 years.
However, Euro traders will be more focused on whether the US government decides to impose new tariffs on automotive imports from the European Union in mid-November, a move which could further weaken the European economy.
GBP/EUR Exchange Rate Flat, UK Construction PMI Falls
The Pound (GBP) failed to gain against the Euro (EUR) today following this morning’s release of the UK Construction PMI for October, which remained firmly in contraction territory at 44.2, and slowed at its fastest rate since the 2009 financial crisis.
Tim Moore, Economist at IHS Markit, commented:
‘UK construction companies experienced a downturn in business performance during October as political uncertainty and subdued economic conditions again combined to hold back sales. New orders have fallen in each month since April, which is the most prolonged period of decline recorded for more than six years’
British politics remain in focus ahead of December’s general election, and while the Tories lead in the polls, analysts can only take their best guess as to whether we could see another hung parliament on December 12th, with Sterling subdued on rising uncertainty.
EUR/GBP Outlook: Could Sterling Rise on Improving UK Services PMI?
Pound investors will be awaiting tomorrow’s release of the UK Services PMI for October which is predicted to remain in contraction at 49.7. However, any surprise improvement could buoy Sterling as growth in the UK’s largest sector would improve market confidence in the economy.
Tomorrow will also see October’s UK BRC retail sales figure, which is expected to improve from -1.7% to 0.5%.
Meanwhile, Euro investors will pay close attention to tomorrow’s Eurozone PPI figure for September, which is expected to rise by 0.1%.
The EUR/GBP exchange rate is expected to be driven by UK political news for the first half of this week, with any predictions that the Conservatives will secure a win in December’s general election likely to see the Pound rise on hopes of returning political stability.