Update: GBP EUR is weakening today, despite an upside surprise from the UK services PMI, which rose to 55.8 instead of weakening to 54.5. However, with Emmanuel Macron perceived by 63% of viewers to have ‘won’ last night’s French Presidential Election TV debate, the Euro is climbing on hopes Marine Le Pen will be kept from government after Sunday’s vote.
Former US President Barack Obama has thrown his backing behind Macron in a new video, in which he says the centrist candidate has ‘put forward a vision for the important role that France plays in Europe and around the world. He appeals to people’s hopes, and not their fears.’
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A new account of the recent working dinner held between Prime Minister Theresa May and European Commission President Jean-Claude Juncker is keeping the GBP EUR exchange rate soft today.
Positive manufacturing data has allowed the pairing to remain above opening levels, however.
According to a report in German newspaper Frankfurter Allgemeine, Juncker left the meeting – which Downing Street had described as ‘constructive’ and a ‘useful working dinner’ – taken aback by May’s unpreparedness.
The paper claims the Prime Minister had unrealistic expectations regarding how the exit negotiations would unfold and the amount of time they would take.
She also apparently refused to acknowledge the possibility that the UK may owe the EU billions of Pounds, to cover what has been dubbed the ‘divorce bill’, claiming there is no basis for this in the treaties of the EU.
It is suggested that, at one point during the meeting, Juncker produced copies of Croatia’s deal to secure entry into the EU and the Comprehensive Economic and Trade Agreement (CETA) recently signed between the project and Canada, to highlight just how complex it was to negotiate a deal.
A better-than-expected Markit manufacturing PMI has helped to soften GBP losses, although the Pound still remains on soft form overall.
The latest business survey has shown that manufacturing sector activity accelerated unexpectedly in April, with the index rising from 54.2 to 57.3 – a three-year high.
Businesses reported accelerating output, total new orders and export work thanks to strong confidence, which resulted in increased hiring activity.
‘The UK manufacturing sector made a solid start to the second quarter,’ explains Senior Economist at IHS Markit Rob Dobson. ‘Growth of output, new orders and employment all gathered pace, driven higher by the continued strength of the domestic market.’
‘Although only accounting for 10% of the economy, the upturn in the manufacturing sector represents some welcome good news after the sharp slowing in GDP seen in the first quarter.’
The strong reading bodes well for the upcoming construction, services and composite PMIs, although considering the latest GDP readings showed a notable weakening in service sector output, the UK’s most important PMI may not mirror the performance of today’s survey.
Relief that the Greek bailout negotiations seemed to have reached a breakthrough helped the Euro to resist the Pound’s advance for most of the morning, but the EUR GBP exchange rate has since slipped below opening levels.
Parties had been desperate to conclude discussions on the bailout in order to complete a review of current proceedings that was required before the next tranche of funds could be unlocked.
Greece desperately needs the funds in order to make debt repayments of almost €7.5 billion, which are due in July.
The negotiations took twelve hours and saw the Greek government agree to yet more cutbacks, including an -18% reduction to pensions, which are likely to be met with fierce opposition back home.
European Commissioner Pierre Moscovici commented; ‘The agreement reached overnight in Athens on the Greek Stability Support Programme is a very positive development following months of complex negotiations.’
‘These new efforts agreed by the Greek authorities open the way for a rapid conclusion of the second review. The swift implementation of these commitments should enable the Eurogroup to endorse this agreement at its next meeting.’
All the day’s data has now been released for the UK and the Eurozone. Tomorrow sees the release of the UK construction PMI and the Eurozone GDP figures for the first quarter of 2017.
As well as domestic releases, the GBP EUR exchange rate could be affected by the approach of the US Federal Open Market Committee (FOMC) monetary policy decision in the evening.
At the time of writing, the GBP EUR exchange rate was trending in the region of 1.18, while the EUR GBP exchange rate was trading around 0.84.