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Euro to Pound Exchange Rate Avoids Losses despite Fresh Signs of Weakness in Eurozone Manufacturing

Euro to Pound Exchange Rate Resilient While Markets Digest UK General Election

Despite today’s poor Eurozone data, the Euro to Pound Sterling (EUR/GBP) exchange rate has continued to edge higher since markets opened this week. Investors also continue to digest last week’s UK General Election and what it means for the Pound (GBP) outlook.

Last week’s hectic session saw EUR/GBP open the week at the level of 0.8417, eventually touching on a high of 0.8496 before plummeting in reaction to the General Election result.

EUR/GBP touched on a three year low of 0.8280 on Thursday night, before steadying and closing the week nearer the level of 0.8340.

Movement has been mixed since markets opened today, but EUR/GBP is trending just above the week’s opening levels at the time of writing.

Investors have been hesitant to sell the Euro (EUR) too much amid weakness in its rival the US Dollar (USD), while the Pound is weighed by Brexit uncertainty and poor UK data.

Euro (EUR) Exchange Rates Benefit from Rival Weakness despite Poor Data

Market demand for the Euro was fairly resilient today, even as Eurozone factories showed some of their weakest growth in five years.

This morning’s French and German PMI projections for December showed that while the services sector was resilient, manufacturing had once again disappointed.

German manufacturing was expected to keep gradually recovering, but the contraction unexpectedly deepened to just 43.4.

Even French manufacturing, performing better than most of the bloc, still slowed to a near stagnant 50.3. Overall Eurozone manufacturing came in at 45.9.

https://twitter.com/IHSMarkitPMI/status/1206502797585326080

Chris Williamson, Chief Business Economist at IHS Markit, said:

‘The Eurozone economy closes out 2019 mired in its worst spell since 2013, with businesses struggling against the headwinds of near-stagnant demand and gloomy prospects for the year ahead.’

Rather than be hugely weighed down by the data, the Euro held its ground due to losses in its rival, the US Dollar (USD). The US Dollar is weaker as investors prefer trade-correlated currencies following the latest US-China trade optimism.

Pound (GBP) Exchange Rates Weighed by Poor UK PMIs

Last week saw the Pound surge in reaction to news that the Conservative Party had won a comfortable majority in Britain’s 2019 General Election.

However, the Pound has struggled to sustain all of those strong gains and has since been steadying lower.

The Pound’s mixed movement continued today. A combination of uncertainty over the next phase of the Brexit process, as well as today’s weak UK data, made it easier for the Euro to hold its ground against Sterling.

Britain’s December PMI projections saw the manufacturing contraction unexpectedly deepen to 47.4. Overall, the composite PMI contracted at 48.5.

Euro to Pound (EUR/GBP) Exchange Rate Awaits Major Data in Coming Sessions

While the Pound is likely to remain supported by hopes for a smoother political outlook, the Euro to Pound (EUR/GBP) exchange rate could be driven more by data in the coming days as investors await the next steps of the Brexit process.

Key Eurozone and UK data will be published throughout this week. Eurozone trade balance and UK job market data will be published tomorrow.

Wednesday’s news will be more influential. German business confidence data and Eurozone and UK inflation stats will be published. On top of this, European Central Bank (ECB) President Christine Lagarde will hold a speech.

Upcoming Bank of England (BoE) news could also drive the Pound. BoE Governor Mark Carney’s successor is expected to be announced soon, and the BoE will hold its December policy decision on Thursday.

Of course, any notable Brexit developments could also influence the Euro to Pound (EUR/GBP) exchange rate.