A better-than-expected score from the UK services PMI hasn’t helped the Pound, with GBP EUR exchange rates tumbling to a five-year low.
- GBP EUR Slumps to Five Year Low – Pound barely avoids breaking into 1.12s
- UK Services PMI Eases Recession Fears – Markets disappointed not to see rise, however
- EUR Unaffected by Mixed PMIs – French and Italian indices weigh on Eurozone composite
- GBP EUR Exchange Rate Forecast – Quiet UK data calendar leaves Brexit fears to dominate
Deutsche Bank fears have been pushed to the side lines today, with little in the way of news regarding the situation to spook or cheer investors.
GBP Rebounds from Recent Lows after Error During Asian Trading
16.43, 07/10/2016: GBP continues to move as if on a pendulum, now breaking above opening levels versus the Euro.
11.10, 07/10/2016: The Pound has now broken below last night’s lows, with traders still reeling from recent developments. GBP EUR is down nearly -1%.
09.47, 07/10/2016: Today’s week industrial and trade data from the UK is unlikely to be the most pressing development weighing on the minds of investors today. The Pound is in a significantly weakened state today after a suspected computer error or ‘fat finger trade’ during the night’s Asian session. While GBP is on the rise, a more than -2% drop against EUR overnight leaves the UK unit severely below yesterday’s closing levels.
Pound Finds no Support from Philip Hammond’s US Q&A
16.30, 06/10/2016: Chancellor Philip Hammond has been in the States today in an attempt to reassure American financial institutions that the UK is still a strong place in which to do business. The Chancellor largely backed Theresa May’s recent comments, although he did try and unwind some speculation that the UK government is intent on discarding single market access, suggesting there will be attempts to negotiate. He also noted that he would be cautious to approve the Bank of England (BoE) initiating another round of quantitative easing, suggesting the BoE will find its policy tools more limited in future. Regardless, the Pound remains firmly in negative territory.
Strong US Data Boosts US Dollar, Euro Pound Rises Too; ECB to Time QE with US Rate Hike?
14.45, 06/10/2016: Could the European Central Bank (ECB) use tighter US monetary policy to compensate for a reduced rate of asset purchases? The ECB is rumoured to be considering tapering its quantitative easing and, if this was timed to coincide with a likely December rate hike, might help to soften the impact of retreating stimulus measures.
Pound at Psychological Support? Merkel Firm on Single Market Access but GBP Unmoved
10.45, 06/10/2016: The strongest set of comments from Angela Merkel yet regarding the inseparable nature of the single market and freedom of movement have failed to weaken the Pound further, suggesting GBP may have found psychological support. Meanwhile, poor retail PMIs for the Eurozone have allowed the GBP EUR exchange rate to edge back towards opening levels. Only the German index held in positive territory, while only the Italian index registered improvement, although it remains the worst scoring Eurozone retail PMI today with a solid contraction score of 45.
Euro Pound Exchange Rate Advancing on Rumours of ECB QE Tapering
08.55, 06/10/2016: The Euro has gained some support today thanks to suggestions that the European Central Bank (ECB) may look to taper its monthly bond purchases going forward. This would suggest the ECB is winding down the quantitative easing programme, which currently sees the central bank buying up €80 billion of assets each month. A downside to this is the question of the ECB’s motivation; are they easing back on QE because they think it has been effective, or because they think it hasn’t?
Pound Euro Slide Ends as May Attacks Loose Monetary Policy
15.25, 05/10/2016: Prime Minister Theresa May has managed to provide support for the Pound where the earlier services PMI was unable to. The PM launched a strongly-worded attack on loose monetary policy, claiming that ‘people with assets have got richer, while people without have not‘. This has been seen as a bold warning to the Bank of England (BoE) not to loosening monetary policy even further. While the BoE is independent of the UK government, markets are nonetheless viewing May’s words as having, at the very least, complicated any plans for further easing. The GBP EUR exchange rate has been able to recoup losses and return to positive territory, making advances of 0.2%.
Market Discontent at Article 50 Trigger Timeframe Keeps GBP EUR at Five Year Low
The Pound has remained in a weak position today, with traders still reluctant to buy Sterling after the weekend’s announcement. Not even a smaller-than-expected weakening in the UK services PMI could provide Sterling much momentum.
David Noble, Chartered Institute of Procurement and Supply CEO, hints that the data may encourage the Bank of England (BoE) to put off further attempts to stimulate the economy, commenting;
‘Policymakers were offered much-needed positive news for September after the recent Brexit upheaval, as the service sector reported the fastest increase in new business since February this year.’
The Pound has weakened to such an extent that the UK has now slipped a place on the list of the world’s largest economies, dropping into sixth behind France.
Euro Advances, Ignoring Mixed PMIs and Persistent Deutsche Bank Fears
Concerns over Germany’s biggest lender appear to have abated somewhat today. The latest run of Eurozone PMIs has largely been ignored, even though earlier estimates have been revised down in some cases. The French and Italian services and composite indices all weakened further-than-forecast, with Italy’s services index performing particularly badly, slumping from 52.3 to 50.7.
The German and Eurozone results were more positive, mostly rising against forecasts. However, the fact that the Eurozone composite remained at 52.6 showed that weak economies were dragging on the bloc’s overall strength.
Pound Euro (GBP EUR) Exchange Rate Forecast; Lack of UK Data Could see Euro Dominate
There is no impactful UK data on the calendar tomorrow, leaving only Eurozone releases to generate GBP EUR movement. German factory orders are forecast to have grown, while the German construction PMI and retail PMIs from several member states, could provide further support.
The Pound could be set for further depreciation without data to provide support – not that recent data has been able to counter market sentiment so far. On the other hand, with a large portion of the market still positioned against Sterling, the Pound could soon stage a recovery as investors holding short GBP positions buy the currency back to realise their gains.
Current GBP, EUR Conversion Rates
The Pound Euro (GBP EUR) exchange rate is currently trading between 1.1301 and 1.1364, while the Euro Pound (EUR GBP) exchange rate is trending between 0.8799 and 0.8843.