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Euro Pound Exchange Rate Trading in a Narrow Range Following Publication of the UK’s and Eurozone’s PMI

Euro Pound Exchange Rate Mixed in Response to Strong PMI’s for both UK and Eurozone

The Euro Pound (EUR/GBP) exchange rate is trading flat today as both the UK and Eurozone benefit from strong PMI data.

At the time of writing, the EUR/GBP exchange rate is trading at around £0.8334, with minimal market movement.  

Euro (EUR) Mixed Following PMI Print

The Euro (EUR) is rangebound against the Pound (GBP) this morning following the publication of Eurozone PMI manufacturing and services.

The Eurozone’s services index printed at a three month high, reaching 55.8, higher than both the forecast and previous readings of 52 and 51.1, respectively.

Having printed close to stagnation in January, services have seen the greatest improvement in growth, showing the fastest pace of recovery since November.

Meanwhile, the Eurozone’s manufacturing PMI printed at 55.6, achieving a five month high, with output growth accelerating marginally due to improved supply availability.

The strong PMI readings for the Eurozone may boost expectations the European Central Bank (ECB) may hike rates earlier than expected.

Chris Williamson, Chief Business Economist at IHS Markit commented:

‘The [E]urozone economy regained momentum in February as an easing of virus-fighting restrictions led to renewed demand for many consumer services, such as travel, tourism and recreation, and helped alleviate supply bottlenecks.

‘At the same time, soaring energy costs and rising wages have added to inflationary pressures, resulting in the largest rise in selling prices yet recorded in a quarter of a century of survey data history.

‘The strength of the rebound in business activity signalled by the PMI provides welcome evidence that the economy has so far shown encouraging resilience in the face of the Omicron wave, but the intensification of inflationary pressures will add to speculation of an increasing hawkish stance at the ECB.’

In addition, news of a possible diplomatic solution regarding the Ukraine crisis is easing concern of a war on the EU’s doorstep and bolstering the Euro’s potential.

Pound (GBP) Muted In Response to Strong PMI Print

The Pound (GBP) is directionless against the Euro (EUR) following better-than-expected PMI services and manufacturing data.

The services PMI printed at 60.8 in February, higher than the forecast 55.5 and significantly higher than January’s 54.1 reading.

This was largely due to increased demand in the travel, leisure and entertainment sectors.

On the other hand, the manufacturing PMI remained unchanged at 57.3 instead of dropping to 57.2 as expected.

Due to raw material availability and restocking, manufacturing factory outputs improved by the largest amount in eight months, however labour shortages capped the industry’s capability.

Duncan Brock, Group Director at CIPS, said:

‘Recovery in private sector business went up a few notches in February with the fastest uptick in new order levels for eight months and buoyant optimism the highest since May 2021.

‘On the other side, manufacturers saw a subdued pipeline of work along with job hires as building capacity remained difficult with the continuing talent shortages and vacancies were unlikely to be filled.

‘As the shadow of the pandemic recedes and Brexit obstacles come into view, respondents reporting ongoing delays and customs difficulties show there are challenges aplenty for the coming months.’

Euro Pound Forecast: Central Bank Speeches in Spotlight

Looking ahead, policymakers from both the Bank of England (BoE) and European Central Bank (ECB) have speeches scheduled tomorrow.

Should BoE’s Dave Ramsden or ECB’s Elizabeth McCaul strike a hawkish tone, it may influence the Euro Pound exchange rate. 

Meanwhile the Euro may be bolstered by Germany’s IFO business climate index, as economists forecast business morale will have improved again this month.