The Euro to Pound exchange rate has seen a minor rise on 4th April, following the release of supportive Eurozone ecostats.
Eurozone unemployment has fallen to the lowest level in a decade, while initial estimates for the inflation rate have also been upgraded.
On the other side of the pairing, the Pound has endured losses following the news that the UK construction sector contracted in March.
This wasn’t the expected outcome, so the result damaged the Pound considerably.
(First published 3rd April, 2018)
Disappointing Eurozone Manufacturing Stats Trigger EUR/GBP Exchange Rate Slide
The Euro to Pound (EUR/GBP) exchange rate has seen a minimal decline today, following the release of disappointing Eurozone manufacturing PMI data.
French, German and Eurozone-wide levels of manufacturing activity have fallen in March, with the finalised figures confirming this disappointing news.
IHS Markit Chief Business Economist Chris Williamson emphasised the historically disappointing nature of these ecostats, saying;
‘March saw the biggest fall in the manufacturing PMI since June 2011 and the third successive slowing in the pace of expansion’.
Pound to Euro (GBP/EUR) Exchange Rate Rises after Minor UK Manufacturing Growth
The Pound to Euro exchange rate (GBP/EUR) has risen marginally on 3rd April, following the news that UK manufacturing sector activity has risen slightly in March.
The reading has ticked higher from 55 points in February to 55.1 in March, beating forecasts for a slowdown to 54.7 points.
In a note attached to the data released by IHS Markit, Duncan Brock of the Chartered Institute of Procurement and Supply said;
‘The key question is whether growth can now be sustained, albeit at a lower level, into the coming months. On that front the news is generally positive.
Manufacturers are still reporting solid inflows of new work from domestic and overseas markets.
Business optimism is holding steady at an elevated level, with over 54% of companies expecting output to expand over the coming 12 months.
With cost inflationary pressures also moderating to provide some respite for margins, the sector looks set to make further slow and steady progress as we head through the spring’.
Euro to Pound Exchange Rate Exchange Rate Forecast: Will EUR/GBP Advance on Eurozone Inflation Stats?
Current estimates are for a rise for March’s inflation rate estimate, which may trigger a EUR/GBP exchange rate rally.
If inflation levels start to show consistent growth towards the European Central Bank’s (ECB) 2% target, then optimism about tighter monetary policy could grow.
Additionally, a forecast-matching drop in February’s Eurozone unemployment rate from 8.6% to 8.5% could also boost demand for the Euro.
This would put the Eurozone unemployment rate at its lowest level since the late 2000’s, so may completely reverse the latest EUR/GBP decline.
Pound traders looking for additional sources of GBP movement will be stuck with more PMI activity readings out over Wednesday and Thursday this week.
Both the construction and services PMI readings are tipped to show slowing activity in March; a services sector slowdown in particular could damage the Pound.
This is because the services sector is the single largest contributor to UK economic growth, so slowing activity could have a negative impact on UK GDP in the future.