The Pound Euro (GBP EUR) exchange rate struggled to advance in this morning’s trading session as the UK’s latest Manufacturing PMI disappointed investors.
Pound (GBP) Weakened by Lacklustre Manufacturing PMI
Sterling found its early gains against the Euro extinguished this morning following the release of the UK’s latest Manufacturing PMI.
According to IHS Markit who compiled the data activity in Britain’s factories fell sharply from 56.3 to 54.3 in June, a disappointing outcome for investors who had expected the sector to expand slightly to 56.5.
The data pointed to a broad based slowdown across the entire sector as firms appeared to have become increasingly concerned over the impact of Brexit, leading to a decline in new procurements and employment.
Also of note was the decline in both imports and exports, with June’s data appearing to dispel the theory that the weakened Pound would cause export demand to rise.
Duncan Brock of the Chartered Institute of Procurement & Supply said;
‘Manufacturing activity showed signs of slowing this month, as fears that the sector would feel the impact of both the election and the start of Brexit talks materialised.’
‘While the sector remained in growth, a softening of new orders suggested some hesitancy from the UK to commit to new projects, which will be a worry as the domestic market has been the main driver of growth in the past two months.’
The fall in June’s manufacturing PMI has also cast some doubts over the UK’s second quarter growth prospects, with analysts fearing that a rebound from Britain’s poor GDP figures at the start of the year may not be as strong as first hoped.
Euro (EUR) Advance Slowed as Eurozone Unemployment Fails to Improve
Despite a better than expected rise in the Eurozone’s own manufacturing PMI, which struck its best levels since the start of the debt crisis six years ago, the Euro still made little gains this morning thanks to stagnant Unemployment figures.
While jobless levels showed some improvement, EUR investors were disappointed as the unemployment rate held at 9.3% in May as despite being at an eight year low it was still higher than the 9.2% predicted by economists.
Once again it was Greece which saw the highest unemployment in the bloc, with the jobless rate reportedly at a dizzying 22.5% as the nation continues to struggle under austerity pressure from its creditors.
GBP EUR Forecast: UK Construction PMI to Prompt More Weakness in Sterling?
Looking ahead the GBP EUR Exchange rate is likely to stumble again on Tuesday with the release of the UK’s latest Construction PMI, with analysts forecasting that it will have slipped from 56 to 55 in June, although with the sector accounting for only a small percentage of UK growth it is unlikely to be as impactful as today’s manufacturing data.
Meanwhile the Euro may weaken tomorrow if in his speech, European Central Bank (ECB) policy maker Peter Praet confirms that bank is not seeking to wind up its quantitative easing programme in the near future.
Current Interbank Exchange Rates
At the time of writing the GBP EUR exchange rate was trending around 1.1398 and the EUR GBP exchange rate was trending around 0.8774.