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Euro to Pound (EUR/GBP) Exchange Rate Edges Higher Despite Signs of Stalling Eurozone Economy

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EUR/GBP Exchange Rate Rises as Eurozone’s PMIs Beat Forecasts

The Euro to Pound (EUR/GBP) exchange rate rose by 0.2% today, with the pairing currently fluctuating around the region of £0.908.

The Euro (EUR) rose today following the release of the Eurozone’s PMI Composite report for September.

The figure showed a better-than-expected improvement, but failed to improve the outlook for the bloc’s economy in the months ahead.

Chris Williamson, the Chief Business Economist at IHS Markit, commented on the data:

‘With the Eurozone economy having almost stalled in September, the chances of a renewed downturn in the fourth quarter have clearly risen.’

‘Much will depend on whether second waves of virus infections can be controlled, and whether social distancing restrictions can therefore be loosened to allow service sector activity to pick up again.’

Today also saw the release of the latest Eurozone’s Retail Sales report for August. The figure beat forecasts and rose from -0.1% to 3.7%.

Bert Colijn, the Senior Eurozone Economist at ING, said:

‘Retail sales grew by a whopping 4.4% in August. Increased spending due to pent-up demand and higher savings boosts goods consumption, but these levels of retail sales cannot be maintained in the months ahead weakening the consumption outlook for [the fourth quarter].’

Pound (GBP) Sinks on Lack of Progress in Brexit Negotiations

The Pound (GBP) fell today as Brexit uncertainty continues after this weekend’s video conference between Prime Minister Boris Johnson and the European Commission’s President Ursula von der Leyen.

With a lack of any clear consensus, GBP investors have remained cautious as the likelihood of a no-deal Brexit remains high.

Mr Johnson said in an interview on the BBC:

‘Alas, there are some difficult issues that need to be fixed, and there’s no question that the EU needs to understand that we’re utterly serious about needing to control our own laws and our own regulations, and similarly they need to understand that the repatriation of the UK’s fisheries … is very important.’

Today also saw the release of the latest UK Services PMI for September, which beat forecasts and rose from 55.1 to 56.1. However, this was not enough to beat the Brexit and Covid-19 gloom surrounding the British economy.

In other UK economic news, this evening will see the release of the latest BRC like-for-like Retail Sales report for September. Any indications that the sector is flagging would prove GBP-negative.

EUR/GBP Outlook: Could Brexit Progress Buoy Sterling This Week?

Euro (EUR) traders will be looking ahead to Tuesday’s release of the German Factory Orders report for August. If this confirms consensus and plummets to -19.9%, then the single currency would suffer.

Tomorrow will also see the European Central Bank’s (ECB) President, Christine Lagarde, deliver a speech. Any signs of an ECB that is becoming more dovish in light of rising Covid-19 cases would prove EUR-negative.

Sterling traders will be keeping a close eye on tomorrow’s UK Construction PMI for September. If the nation’s construction sector has been heavily impacted by Covid-19, then the GBP/EUR exchange rate could fall further.

Brexit will remain in focus this week. Any signs of a possible post-Brexit trade deal emerging between the UK and EU would prove GBP-positive.