- Pound Slumps as ‘Brexit’ Fears Return – Concerns grow on increased bets towards ‘Leave’
- Euro (EUR) Sentiment Boosted by German Data – Other Eurozone data also solid
- Forecast: UK Manufacturing PMI Beats Forecasts – Fails to increase demand for Sterling
- Forecast: ECB Decision Flat – Policymakers reiterate previous comments
GBP/EUR Up 0.3% Before Services PMI
With European Central Bank (ECB) policymakers indicating that further stimulus will be introduced if it proves necessary, the Pound held previous gains against the Euro ahead of the release of the UK’s Services PMI.
If the services gauge shows an impressive improvement, the Pound could firm further before the weekend.
(Previously updated 12:30 02/06/2016)
Pound Unchanged Following Construction PMI
The Pound Sterling to Euro exchange rate experienced little movement following the release of the UK’s Construction PMI.
While economists had anticipated an unchanged reading of 52.0, the measure actually softened to 51.2 in May.
The report left the GBP/EUR currency pair unshaken at 1.2882.
Before the weekend the UK’s Services PMI could give the Pound a moderate boost as long as it shows improvement.
(Previously updated 08:30 02/06/2016)
GBP/EUR Down to 1.28 Ahead of UK Construction PMI
Just before the publication of the UK’s Construction PMI the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.2880.
If the gauge of construction output impresses, the GBP/EUR exchange rate could edge higher but movement is likely to be limited in the build up to the European Central Bank’s (ECB) interest rate decision.
(Previously updated at 17:15 01/06/2016)
The Pound Sterling to Euro (GBP/EUR) exchange rate fluctuated before slipping slightly during Tuesday’s session, as Sterling investors began to worry once more that Britain could ‘Brexit’ from the European Union while optimistic German data boosted the Euro.
After a high of 1.3196, GBP/EUR dropped around -130 pips and fluctuated narrowly in the region of 1.3060 on Tuesday afternoon, well down from the week’s opening levels.
Brexit concerns are likely to be the main driver of GBP movement in the weeks ahead and today’s UK Manufacturing PMI failed to provide the Pound with much support despite the index unexpectedly climbing back above the 50 mark separating growth from contraction.
Markit’s Senior Economist Rob Dobson had this to say of the results; ‘Although the domestic market remains positive for manufacturers, especially for producers of consumer and intermediate goods, softer global growth is weighing on new export orders. There are also signs that increased client uncertainty resulting from slower growth and the forthcoming EU referendum is weighing on investment spending. Manufacturers will have to wait and see whether this trend improves in the coming months.’
Thursday’s UK Construction PMI is expected to hold at 52.0 in May. A more upbeat result could give Sterling a modest boost ahead of the European Central Bank’s policy meeting.
Pound Sterling (GBP) Slips as ‘Leave’ Campaign Ramps Up Debates
The British Pound just barely held its ground on Tuesday despite being left with little more than light domestic data and ongoing ‘Brexit’ debates alongside strong Eurozone data.
Tuesday morning’s data revealed that the number of British businesses expecting trade to improve in the next year was a small 38%, according to a report from Lloyds Bank. This marked the lowest levels in the Lloyds Bank Business Barometer since 2013.
The reason for the drop in confidence was underwhelming UK data throughout May, alongside continued warnings of the financial struggles Britain could face in the event of a ‘Brexit’.
On the subject of the EU referendum, new polls held over the bank holiday period indicated that the previously perceived lead for the ‘Remain’ campaign had shifted due to the ‘Leave’ campaign’s increased focus on immigration rhetoric. Bloomberg reports;
‘Sterling fell against most of its major peers as Bookmaker William Hill Plc said 85 percent of all EU referendum bets taken over Monday’s public holiday in the UK were in favor of Britain exiting the bloc, and that the odds for a Brexit increased.
An ORB poll for the Daily Telegraph newspaper showed 51 percent of definite voters surveyed supported remaining in the bloc, and 46 percent wanted to leave. This was a narrower lead for the remain camp than in ORB’s previous poll.’
Euro (EUR) Sentiment Steadies as German Data Impresses
The Euro has recently struggled to gain ground due to mixed data throughout the Eurozone, with Germany’s economic performance being strong while other Eurozone prints hold the Euro back.
This week seems to follow that trend so far. While Monday’s German Consumer Price Index (CPI) printed 0.3% month-on-month and 0.1% year-on-year as expected, Tuesday’s session was more influential. German retail sales improved from 0.6%, past the estimated 1.7% to 2.3%.
The highly anticipated German unemployment figures, on the other hand, made a great impression on economists when an unemployment change of -11k was reported, bringing the key unemployment rate down to a low 6.1%. This marked the lowest that German unemployment had been since the German reunification in the 1990s.
Other Eurozone unemployment figures were also optimistic. The general Eurozone unemployment rate was at 10.2% in April, an improvement from last April’s 11%.
Unfortunately, Euro sentiment was held back slightly by the Eurozone’s latest CPI scores. The newest CPI estimate came in at -0.1% as expected, and while this was an improvement from the previous estimate of -0.2% it still indicated that the Eurozone remained in deflation. The CPI core score printed a more optimistic improvement from 0.7% to 0.8% year-on-year.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Manufacturing PMI This Morning
The Pound’s current drop could continue on Wednesday’s session if ‘Brexit’ debates continue to flow in the ‘Leave’ campaigns favour, but otherwise investor attention will be focused on the day’s Manufacturing PMI reports.
The Eurozone’s final May Manufacturing PMI figures are due for release first, with Italian, French, German and general Eurozone reports due from Markit. The figures are currently expected to meet preliminary results, besides the Italian score which is expected to worsen from 53.9 to 53.0.
Later on in the morning, Markit will release its UK Manufacturing PMI report for May, which is projected to improve slightly from 49.2 to 49.6. However, a score below 50 is likely to weigh on the Pound as investor worries that the UK’s economy was nearing stagnation could otherwise worsen.
Other reports due throughout the day include Nationwide’s UK house prices report, British net consumer credit and British mortgage approvals.
Investors may also remain wary on the Euro throughout the day as they await Thursday’s session, which will see the European Central Bank’s (ECB) latest monetary policy decisions.