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Euro Pound Exchange Rate Extends Lows on Optimistic UK Data

EUR exchange rate forecast

The Euro Pound exchange rate has fallen consistently this week, and while EUR/GBP was able to rise from Thursday’s worst levels (influenced by strong UK manufacturing data) the pair continued to trend with a downward bias on Friday as UK construction also beat expectations.

  • Euro Pound Exchange Rate Down Almost a Cent– Sterling on track to sustain week’s advances
  • UK Construction Contracts Less Than Expected – Allows Pound to hold on Friday
  • Update: US Data Leaves Sterling Stronger ­– US Non-Farm Payrolls disappoint
  • Forecast: Will UK Services PMI Impress? – Report on UK’s biggest sector due Monday

Euro Pound Exchange Rate Slides Further as Week Draws to End

The Euro to Pound exchange rate fell further into its weekly lows on Friday afternoon, hitting a new low of 0.8380 due to low demand for the Euro amid the week’s poor Eurozone data.

Poor US Non-Farm Payroll figures published on Friday afternoon allowed Sterling to extend its advances, as USD investors bought the Pound thanks to the week’s better-than-expected UK data.

Investors were also hesitant to buy into the Euro, as speculation flared up once more that the European Central Bank (ECB) could begin to contemplate additional economic stimulus measures in the coming months.

The ECB’s next meeting takes place next Thursday, and while policymakers are expected to leave rates frozen it is unlikely that the Euro will strengthen considerably in the coming week unless influential data manages to impress.

Sterling, on the other hand, has the opportunity to advance even further on Monday if Britain’s Services PMI figure beats expectations as its Manufacturing and Construction PMIs did.

(Published 11:09 BST 02/09/2016)

EUR/GBP has lost almost a cent in value since the week’s opening levels of 0.8523, but after falling almost half a cent on Thursday alone and hitting 0.8394, its lowest level since the beginning of August, the pair recovered slightly and on Friday morning was trending in the region of 0.8424.

Euro (EUR) Given Slight Boost by Weak USD

This week’s data has been generally unkind to Euro (EUR) exchange rates, with key Eurozone data released on Wednesday indicating that the currency bloc’s inflation was not improving as hoped and with other data revealing that Eurozone growth was slow overall.

Thursday saw the publication of Markit’s final August Eurozone Manufacturing PMI, which was expected to meet preliminary scores of 51.8. However, the print came in at 51.7, increasing concerns towards the Eurozone’s 2016 performance.

As the primary goal of the European Central Bank’s (ECB) aggressive stimulus package from earlier this year was to stimulate Eurozone growth, activity remaining this mixed in August has caused speculation to flare up on the possibility of further easing being introduced as soon as September.

However, the Euro was able to advance slightly on Thursday thanks to a slew of disappointing figures from the US. This included ISM’s headline August Manufacturing print, which was expected to slow from 52.6 to 52 but instead scored a surprising contraction of 49.4.

As the Euro is one of the US Dollar’s biggest rivals, the disappointment and fall of Federal Reserve rate hike bets that followed on Thursday afternoon led to many investors selling USD in favour of EUR.

Pound (GBP) Exchange Rates Higher on Rebound in UK Data

After July’s downtick in British activity, largely blamed on the nation’s Brexit-vote in late-June, markets had expected this to become a more long-term downtrend, with dire figures forecast for key UK prints in August.

However, the last two weeks have indicated that activity began to normalise slightly in August. The most impressive figure to investors so far was Thursday’s August UK Manufacturing score from Markit – which showed surprising growth of 53.3 despite analysts forecasting contraction of 49.

This news caused Sterling’s value to surge across the board on Thursday, with Pound (GBP) exchange rates reaching levels not seen since early-August.

While Sterling was not able to hold its best levels as markets readjusted their levels ahead of Monday’s Services and Composite PMI scores, it was able to sustain a large amount of these gains.

The Pound trended a little more flatly on Friday, but a better-than-expected August Construction PMI from Markit helped the Pound Euro exchange rate hold its ground after scoring a smaller-than-expected contraction.

Investors expected July’s score of 45.9 to improve to 46.5 in August, but the figure instead came in at 49.2.

However, it wasn’t all good news as Markit Economist Tim Moore commented that the figures indicated ‘only a partial movement towards stabilisation, rather than a return to business as usual’.

Euro Pound Exchange Rate Forecast: US Data and Monday PMIs to Move EUR/GBP

As it stands, the Euro to Pound exchange rate is on track to complete its second consecutive week of losses thanks to the week’s slew of better-than-expected UK data.

Even weakness in the US Dollar is unlikely to cause EUR/GBP to recover to levels above 0.85. However, the Euro could still minimise its weekly losses if the US August Non-Farm Payrolls report disappoints.

As the Federal Reserve has put a lot of importance on the US job market in recent weeks, the health of the job market will be assessed through August’s NFP results. Poor scores could lead investors away from the US Dollar and towards its major rivals, like the Euro.

But such movement is likely to be limited. Instead, investors will look ahead to Monday’s UK Services PMI results for the next big opportunity to move on EUR/GBP.

While the Eurozone’s final August PMIs may cause movement if the results are different to preliminary scores, Britain’s Services PMI has the biggest potential for movement as Services are Britain’s biggest sector.

If a better-than-expected improvement in UK Manufacturing was enough to send Sterling up over half a cent within minutes, a solid Services score could see it surge further. July’s report printed a disappointing contraction of 47.4, so any growth score (above 50) will boost Sterling.

At the time of writing, the Euro Pound exchange rate trended in the region of 0.8424, while the Pound Euro exchange rate traded at around 1.1871.