Cautious ECB Speech Prompted Dramatic Euro (EUR) Drop Yesterday to Benefit GBP/EUR Exchange Rate
Although the Pound (GBP) softened considerably on the significant underperformance of the UK Services PMI yesterday, the GBP/EUR exchange rate soared in the afternoon thanks to dovish words from the European Central Bank (ECB) President Marco Draghi. Nevertheless, the pairing has returned to a downtrend today as the initial burst of Euro (EUR) pessimism wears off, currently at 1.3670.
Ahead of the day’s US Change in Non-Farm Payrolls data the GBP/USD exchange rate has seen little improvement in sentiment, moving down at 1.5226 at time of writing.
Improved Eurozone Unemployment figures and Services PMIs have prompted another downturn for the GBP/EUR exchange rate, while the softness of the Pound (GBP) has kept the GBP/USD pairing dovish today.
Strengthened Services and Composite PMIs for the Eurozone are Bolstering the Euro (EUR) Today
For two days on the trot now the outlook of Sterling (GBP) has been hampered by under-performance on the UK’s August PMI figures, with both the Manufacturing and Construction indices printing lower than forecast. Coming on the heels of hawkish comments at the weekend from Bank of England (BoE) Governor Mark Carney, these figures shot down any improvement in investor confidence he had been attempting to curry. While the Manufacturing PMI declined on both the previous month and the projected result at 51.5, the Construction PMI proved slightly less disappointing as it still produced some growth at 57.3, albeit at a lower level than had been hoped. Leading to increased speculation on the current condition of the UK’s economic recovery, and the level to which it is ultimately insulated from the global slowdown, this data pushed the GBP/EUR exchange rate into a significant downtrend and prompted the striking of a fresh three-month low of 1.3523.
The Eurozone also posted generally negative Manufacturing PMIs on Tuesday with only the German economy beating estimates to post increased production. However, pundits were soon reassured by the release of the commodity bloc’s latest Unemployment data. It was revealed that unemployment in the Eurozone has now fallen to its lowest level in three years at 10.9% as the majority of member states reported fresh decreases. However, as attention turned towards today’s upcoming European Central Bank (ECB) Rate Decision and the potential for renewed easing measures, sentiment towards the currency has been a little more mixed.
As the final Services and Composite PMIs for Eurozone have released this morning, showing strong rises in spite of economic turmoil over the course of the last month, the Euro is presently experiencing a boost across the board. In consequence, at the time of writing the GBP/EUR exchange rate is slumping at 1.3580.
GBP/USD Exchange Rate Remains Weak with Investor Caution over Upcoming UK Services PMI
Although several key members of the Federal Open Market Committee (FOMC) have recently displayed some relatively dovish attitudes towards the possibility of a Fed interest rate take-off later this month, speculation on the matter has remained rife. Tuesday’s domestic Manufacturing PMI fell similarly short, with weaker growth than had been anticipated at 51.1 rather than 52.5. However, stable Construction Spending and a weaker Pound prevented the GBP/USD exchange rate from making particular gains as a result of this.
As US Factory Orders significantly declined from an increase of 2.2% last month to just 0.4% in July, the bullish run of the ‘Greenback’ (USD) began to falter. Even though the positive Employment Change raised the appeal of the currency, it still seemed to decline, as the closing of China’s stock market for the rest of the week encouraged some degree of risk appetite to return to trading.
Later today the US Non-Manufacturing PMI and Trade Balance stand to spur further movement for the GBP/USD pairing, with the possibility of driving the exchange rate still lower if either figure prints strongly. Ahead of these, and with the Pound dovish after another shortfall on the latest UK PMI, the GBP/USD exchange rate is currently in a downtrend at 1.5253.