- Pound Euro Exchange Rate Dips Below 1.18 – GBP EUR towards July’s lows on Tuesday
- Final UK Manufacturing PMIs Print Lower – Eurozone figures optimistic
- Update: Other PMIs Fail Expectations – UK Composite worse-than-expected
- Forecast: BoE Meeting for ‘Super Thursday’ – Rate cut bets continue to rise
Pound Euro Exchange Rate Reaches 1.19 Before ‘Super Thursday’
The Pound continued to rally against the Euro on Wednesday despite grim UK ecostats weighing against the currency’s appeal, as markets readjusted ahead of Thursday’s key session.
With the Bank of England (BoE) likely to finally make a policy change for the 4th of August’s ‘Super Thursday’, markets brought Sterling higher in attempt to make a profit from a presumed Thursday selloff.
Eurozone data could give the Euro strong footing in the coming days, as Markit’s Composite PMI score not only beat preliminary scores of 52.9, but even June’s score of 53.1, coming in at 53.2. This indicated that the Eurozone had scarcely been affected by Brexit panic at all in July.
The BoE is expected to cut the UK interest rate from 0.50% to a new record low of 0.25% on Thursday. However, it is still possible for the bank to shock markets and leave rates frozen as it did in July, which would send Sterling soaring.
(Previously updated 09:07 BST 03/08/2016)
Services PMI, BoE Interest Rate Expectations to Trigger Pound Euro Movement
The Pound Euro exchange rate advanced by 0.8% on Tuesday as the UK’s Construction PMI proved slightly more encouraging than initially expected.
However, the pairing slipped on Wednesday ahead of the publication of the UK’s Services PMI as investors anticipated contraction in the nation’s most dominant sector.
GBP/EUR was trending in the region of 1.1881 before the services report was released.
(Previously updated 02/08/2016)
Pound Euro Exchange Rate Could Fall on Wednesday
After a brief recovery on Tuesday, the Pound could be due for another series of drops on Wednesday as the Bank of England’s (BoE) ‘Super Thursday’ approaches.
Monday Manufacturing PMIs were worse than preliminary figures in the UK, but better in the Eurozone. If this trend continues on Wednesday, GBP/EUR could head back towards its weekly lows despite gaining half a cent on Tuesday.
Speculation on what action the BoE will take on Thursday continues to heat up markets, with predictions anywhere from a shocking lack of any easing policy, to a surprisingly aggressive policy decision for the typically quiet bank.
(Previously updated 10:51 BST 02/08/2016)
Pound Euro Exchange Rate Holding 1.18 Following Construction Report
The Pound Euro exchange rate was left trending in the region of 1.1817 (around the day’s opening levels) following the release of the UK’s Markit Construction PMI for July.
The reading of 45.9 was down from June’s result of 46.0 but was better than the forecast of 44.0.
As the data didn’t elicit as much concern as Monday’s manufacturing report, the Pound stabilised against several of its peers.
(Previously updated 08:00 02/08/2016)
The Pound Euro exchange rate started the week off poorly on Monday’s session, initially floundering on BoE rate cut bets before plunging lower on news that UK manufacturing was even worse than flash figures indicated throughout July.
GBP/EUR slipped below the level of 1.18 on Monday morning, hitting a new three-week-low of 1.1773 and trending with a downward bias throughout the day. The pair neared the key level of 1.20 last week, but slipped lower as BoE rate bets increased. GBP/EUR trended in the region of 1.1819 on Monday afternoon.
Sterling (GBP) Slumps as July Figures Even Worse Than Indicated
The Pound has been undermined in recent weeks by the first figures to indicate how the Brexit decision has affected Britain’s economy since the nation’s EU Referendum.
According to preliminary Manufacturing PMI figures released by Markit on the 22nd of July, UK manufacturing was on track to contract at a level of 49.1 in July.
However, when the final July Manufacturing PMIs were released during Monday’s session they came in even worse than this. UK Manufacturing was ultimately down to 48.2 in July according to Markit’s report.
Markets have taken this as a dire sign of what’s to come, readjusting their bets on other upcoming economic figures for Britain lower and raising their Bank of England (BoE) interest rate cut bets. The Independent reported on the figures;
‘The reading implies the fastest rate of contraction in UK manufacturing activity since February 2013.
Employment decreased for the seventh straight month in July and the rate of job loss was the second-fastest for almost three-and-a-half years, Markit/CIPS said. Firms attributed this to the decline in output and new orders.
The index from fresh orders dipped to 48.3, its lowest in three years.’
This more concrete figure marks a stark contrast from last week’s Q2 growth report, which revealed that the UK economy had grown more than expected from April through June. Indeed, it indicates that UK economic sector activity has plunged between June and July.
Euro (EUR) Holds Ground as German Manufacturing Beats Expectations
As a bloc containing many nations of different economic strength, it’s no surprise to investors when Eurozone economic data is mixed.
That’s what happened during Monday’s session, when Italian Manufacturing performed worse in July than preliminary figures indicated they would. Manufacturing in Italy fell from the preliminary score of 53.5 to 51.2, falling well past an expected final score of 52.5.
However, Eurozone Manufacturing was better-than-expected for the most part. German Manufacturing beat preliminary scores (and the expected final score) of 53.7 by hitting 53.8.
Thanks largely to Germany’s solid Manufacturing score, the Eurozone’s overall Manufacturing PMI beat an expected figure of 51.9, scoring 52.0.
This score was met with mixed reactions from markets. While the figures beat expectations and even outperformed preliminary PMI scores, they were still down from June’s Manufacturing PMIs and, according to The Wall Street Journal, indicated that the Brexit had had an effect on the Eurozone economy;
‘The slowdown across the Eurozone as a whole likely reflects Britain’s June decision to leave the European Union, which created uncertainty about the strength of demand in the Eurozone’s second-largest export market. An immediate consequence of the vote has been a depreciation of the pound’s exchange rate, which makes goods made in the Eurozone more expensive for British buyers and is therefore likely to lead to a fall in demand.’
Despite this, the report is likely to be relieving to many investors. Analysts had previously predicted that the Brexit’s effect on economic growth would be far worse.
Pound Euro Exchange Rate Forecast: UK July PMIs Ahead, GBP EUR to Remain Negative
The Pound’s downtrend may continue through Tuesday if the day’s sole influential UK publication continues the trend set by other recent British ecostats.
While there are no preliminary figures for UK Construction, analysts have dire expectations for this one with many expecting the sector’s contraction to worsen from 46 to 44 or even 43.
With the Brexit having affected UK Manufacturing even worse than bearish investors predicted, some economists have readjusted their bets for construction lower in response to Monday’s news.
Meanwhile, the Euro will likely remain sturdy throughout the day, but could be undermined slightly if June Producer Price figures come in well below expectations.
Currently, PPI is expected to slow from 0.6% to 0.4% in June, bringing the yearly score up slightly from -3.9% to -3.4%.
Looking ahead, investors are unlikely to bring Sterling much higher even if Construction beats expectations as the Bank of England (BoE) is highly expected to be cutting the key UK interest rate this coming Thursday.
Many economists also expect the central bank to introduce other easing measures, introducing a whole package that will likely cause the Pound Euro exchange rate to plunge.