Fresh Admissions from Volkswagen drag EUR/GBP Exchange Rate Down Today
Last night Volkswagen admitted that 800,000 of its vehicles had ‘irregularities’ in their carbon dioxide emissions and that not all of these were necessarily diesel models. Naturally this latest chapter in the ongoing scandal, which is feared could have an even greater impact upon the carmaker, saw shares slump as the Euro (EUR) plunged across the board. Consequently, the EUR/GBP exchange rate is on a downtrend in the region of 0.7082 this morning.
As the single currency (EUR) slumps on the back of fresh accusations of emissions data rigging by Volkswagen, the EUR/GBP exchange rate has continued to downtrend this morning.
UK Manufacturing PMI Unexpectedly Strong, EUR/GBP Exchange Rate Dovish
The week got off to a strong start for the common currency (EUR) as the finalised October Manufacturing PMIs of Germany and Italy clocked in at decidedly higher levels than the provisional figures. Suggesting that the Eurozone’s output was not experiencing quite as much of a decline as previously thought, this helped to shore up demand for the Euro in spite of recent dovish cautions from European Central Bank (ECB) President Mario Draghi.
This trend was reversed, however, when the UK’s Manufacturing PMI was revealed to have jumped significantly on the month, defying expectations of a slight dip to rise from 51.8 to 55.5. Pundits were strongly encouraged by this display of economic strength, prompting the Pound (GBP) to enter a bullish run across the board. Some of these initial gains did taper off in the later day, due to economist scepticism that this strong sector expansion would not be sustained throughout the rest of the quarter.
Volkswagen Scandal Continues to Weigh on Euro (EUR) Today, Pound (GBP) Unaffected by UK Construction PMI Decline
Another blow was in store for the single currency this morning as US regulators have accused Volkswagen of adding ‘defeat devices’ to a number of additional car models, including Porsche and Audi vehicles. Naturally this latest development in the emissions scandal has pushed the Euro down against rivals, with shares in the German automobile giant beginning to slip once again. The possibility of further fines and recalls has put a dent in the outlook of the company, the German economy and by extension the common currency.
Printing as expected, today’s UK Construction PMI was no particular shock to traders, showing that growth in the industry had slipped to 58.8. Although this was not an improvement the lack of a sharper decline prevented any significant reduction in demand for the Pound, especially as this figure remains decidedly clear of contraction territory. Despite construction persisting as the weakest sector within the UK economy, its limited contribution to the national GDP has prevented pundits from taking the news particularly to heart.
EUR/GBP Exchange Rate Forecast: Pound Predicted to Rally if UK Services PMI Shows Improvement
Eurozone data is unlikely to be especially influential tomorrow, with the currency union’s finalised Services PMIs not anticipated to show any particular change on earlier estimates. As investors await further developments in this latest instalment of the Volkswagen scandal the Euro could well extend its current slump.
As the service sector accounts for the largest portion of the UK GDP, Wednesday’s domestic Services PMI could well prompt Sterling volatility. With the index forecast to show a decent uptick in output on the month the EUR/GBP pairing may extend its recent losses if the figure proves sufficiently hawkish.
Current EUR, GBP Exchange Rates
At time of writing, the Euro to Pound Sterling (EUR/GBP) pairing was slumped in the region of 0.7133, while the Pound Sterling to Euro (GBP/EUR) exchange rate was trending positively in the range of 1.4018.