The Euro Pound (EUR/GBP) exchange rate has been mixed for much of this morning’s session as lacklustre from both the UK and Eurozone did little to support the appeal of the respective currencies.
At the time of writing the EUR/GBP pairing are trending around the £0.8581 level as a resurgence in the US Dollar begins to limit the single currency.
Euro (EUR) Begins to Struggle as Eurozone Retail Sales Contract
The Euro has found itself beginning to struggle across the board as a contraction in Eurozone retail sales did nothing to support the appeal of the single currency.
More so, a larger softening in the bloc’s services PMI began to worry investors regarding the Eurozone’s economic recovery from coronavirus.
Joe Hayes, Senior Economist at IHS Markit commented on the latest Eurozone services PMI:
‘While growth will naturally lose some impetus as the post-lockdown boom peters out, there are a number of other downside factors at play. The Delta variant has taken hold in Europe, while further material shortages and transport bottlenecks continue to restrain business activity. Rampant cost increases also persist, but slightly weaker rates of input and output price inflation provided some respite to both businesses and consumers alike, however.’
‘Regardless, another strong quarter-on-quarter rise in GDP is on the cards for the third quarter, and we’re certainly on track for the eurozone economy to be back at pre-pandemic levels by the end of the year, if not sooner.’
Furthermore, a resurgence in the US Dollar has begun to weigh on the Euro’s strength heading into the weekend.
Pound (GBP) Heads Higher Despite Lacklustre Services PMI
The Pound has found itself supported against the Euro this morning despite a fall in the UK services sector during August.
The UK services PMI softened to 55 during the summer as concerns surrounding supply-chains and staffing issues worried businesses.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply commented on the PMI, saying:
‘Service businesses were particularly hit by lockdowns and the loss of workforces, so it was no surprise that the opening of the UK economy led to the fastest levels of job creation in the sector since July 1996.’
‘With the third monthly fall in a row, new order growth failed to impress and work from overseas barely rose. Brexit continued to make its mark and supply shortages and logistics difficulties will pile on the pressure in the coming months but service companies remained buoyant about future opportunities.’
Euro Pound Exchange Rate Outlook: Construction PMI in Focus
Heading into next week, the latest construction PMI from both the UK and Eurozone will be eyed by investors.
If the construction sector continues to grow at a sustained growth in the respective economies the EUR/GBP pairing could trade in a mixed range.
The Euro Pound exchange rate will continue to be driven by any further coronavirus developments in the coming days.