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Eurozone PMI Slowdown Triggers Euro to Pound Exchange Rate Stagnation

EUR/GBP Exchange Rate Stable as Eurozone Composite PMI Drops

The Euro to Pound (EUR/GBP) exchange rate has held close to opening levels today, following news of a slowdown in the Eurozone composite PMI reading.

Considering the implications of the overall PMI reading, IHS Markit Chief Business Economist Chris Williamson said;

‘The final PMI numbers confirm the marked, broadbased fading of the Eurozone’s growth spurt so far this year.

‘The headline index has fallen from an eleven-and-a-half year peak in January to a 15- month low in April.

‘Despite the drop, the PMI is not yet at a worryingly low level, but the survey details hint at further easing in the coming months’.

Pound to Euro Exchange Rate (GBP/EUR) Steady despite New Car Sales Growth

There has been less UK economic data out today, leaving car sales data and political uncertainty as Pound (GBP) influencers.

UK car sales in April 2018 rose by 10.4% compared to a -15.7% decline in April 2017, although this was dismissed as a one-off by industry bodies.

Elsewhere, results have been coming in from the 2018 UK local elections vote which was held on 3rd May.

The final stats aren’t expected until Friday night, but for now the picture is of no real shift in the status quo.

Such a result has amplified the uncertainty of GBP traders, as no clear winner increases the difficulty of measuring sentiment towards government policies.

None of these factors have had a major effect on the Pound to Euro (GBP/EUR) exchange rate, instead leaving the pairing near opening levels.

Euro to Pound Exchange Rate Volatility ahead on BoE Interest Rate Decision

The main factor influencing the Euro to Pound (EUR/GBP) exchange rate next week will come from the UK, when Bank of England (BoE) policymakers meet on 10th May.

Officials will be considering whether to adjust the BoE’s interest rates from the current 0.5%; if there is a hike, it will likely be up to 0.75%.

The odds of a rate hike actually happening are low, however, so the Pound (GBP) could tumble against the Euro (EUR) if there is an interest rate freeze.

The assumption is that a string of poor UK data releases has made a rate hike unlikely.

If policymakers do increase the interest rate then this surprise could trigger a Pound rally.

Upcoming Eurozone data will be less high-impact, consisting of Eurozone retail PMI data on 7th May and German trade balance stats on 8th May.

The Euro could fluctuate when the data comes out; the retail sector is tipped to have contracted in April but a sizable German trade surplus expansion is forecast.

Germany has the largest economy in the Eurozone, so a higher trade surplus could override any negative influences from the earlier retail PMI reading.