The Euro Pound (EUR/GBP) exchange rate has dipped this morning following a lacklustre Markit services PMI from the Eurozone.
At the time of writing the EUR/GBP pairing are trending around the £0.8509 level as Sterling heads higher on the UK’s own better-than-expected Markit/CIPS services PMI.
Euro Struggles on back of Eurozone PMI Figures
The Euro (EUR) has struggled against the Pound (GBP) since market opened this morning as the latest services PMI from the Eurozone missed forecasts.
Whilst the services sector expanded to 59.8 points in July, the PMI was unable to hit the 60.4 forecast.
Chris Williamson, Chief Business Economist at IHS Markit commented on the latest services PMI, saying:
<blockquote> ‘Worries about the Delta variant have become more widespread, however, subduing activity in some instances and raising concerns about the possibility of virus restrictions being tightened again. Hence services growth in July was slightly less marked than the earlier flash estimate and future expectations cooled to the lowest since March, presenting a significant downside risk to the outlook and hinting that growth could begin to slow again as we head toward the autumn.’ </blockquote>
<blockquote> ‘Furthermore, up to now companies have generally seen little resistance from customers to higher prices, but this could change after the current rebound from lockdown restrictions has passed.’ </blockquote>
Pound (GBP) Supported by Better-Than-Expected UK Services PMI
The Pound (GBP) found itself supported against the Euro this morning as the latest services PMI from the UK softened less-than-expected.
Whilst forecasts has thought the sector would soften to 57.8 points in July, the index held on coming in at 59.6.
However, Tim Moore, Economics Director at IHS Markit was more pessimistic surrounding the UK’s economic outlook going forward:
<blockquote> ‘July data illustrates that recovery speed across the UK economy has slowed in comparison to the second quarter of 2021. More businesses are experiencing growth constraints from supply shortages of labour and materials, while on the demand side we’ve already seen the peak phase of pent up consumer spending.’ </blockquote>
<blockquote> ‘The full easing of pandemic restrictions appears to have helped limit the overall loss of momentum towards the end of July. At 59.6, the PMI reading for services output was much stronger than our earlier ‘flash’ figure of 57.8 in July, largely due to the final index covering an extra five working days since ‘freedom day’.’ </blockquote>
Euro Pound Exchange Rate Outlook: BoE Interest Rate Decision in Focus
Tomorrow, all eyes will be on the latest interest rate decision from the Bank of England (BoE), whilst policy-makers are not expected to make any changes investors will look towards the tone the bank takes going forward.
For Euro traders, German factory orders could be the main catalyst for movement in the single currency throughout tomorrow’s session.