With UK data proving more upbeat than expected and reducing Brexit-related concerns, the Pound Euro exchange rate has surged this week. GBP/EUR rallied all the way to 1.19 on the back of an upbeat UK manufacturing report, but is the currency’s rally likely to extend into next week?
- Pound Euro Exchange Rate Forecast to Surpass 1.19 – But will the pair hold its highs?
- Pound (GBP) Thrust Higher by Manufacturing Growth – Sector unexpectedly strong after Brexit-vote
- Euro (EUR) Weighed Down by Lower Manufacturing – August score fails to meet flash results
- Update: UK Construction PMI Remains in Contraction – But result is better-than-expected
- Forecast: UK Services PMI Ahead – Will Sterling rally continue next week?
Pound Euro Exchange Rate Forecast to Advance Next Week
Sterling extended its rally against the Euro on Friday afternoon as markets readjusted their levels in reaction to the past week’s news, as well as upcoming events.
With Britain’s August ecostats generally beating expectations and Eurozone figures letting investors down, Sterling was able to end the week on a strong note.
This was influenced further by some disappointing Non-Farm Payroll stats from the US, which as caused analysts to call off a potential September Fed rate hike.
However, USD investors didn’t flock to the Euro due to Eurozone anxiety ahead of next week’s European Central Bank (ECB) policy decision meeting.
Analysts expect that the bank will leave policy frozen, but low inflation results in recent months have indicated that the ECB may be forced to expand its stimulus measures in the coming months.
The Pound to Euro exchange rate will see its next big movement potential on Monday, as Britain’s August Services PMI figures are published. As services are the UK’s biggest sector, an unexpected growth after July’s contraction would cause Sterling to surge.
Conversely, if the gauge holds at previous levels or worsens it would undo the good done by the manufacturing report and pressure Pound Sterling (GBP) exchange rates lower.
Other UK data to be aware of next week includes industrial and manufacturing production figures and Halifax Home Prices.
(Previously updated 13:02 BST 02/09/2016)
The Pound Euro exchange rate remained trending around 1.1870 on Friday despite the UK’s Construction PMI printing above expected levels.
Although the measure was still in contraction territory, it improved from 45.9 to 49.2, a considerably better result than the 46.5 reading anticipated.
Markit economist Tim Moore noted; ‘The downturn in UK construction activity has eased considerably since July, primarily helped by a much slower decline in commercial building. Construction firms cited a nascent recovery in client confidence since the EU referendum result and a relatively steady flow of invitations to tender in August.’
Meanwhile, David Noble of the Chartered Institute of Procurement & Supply commented; ‘Employment levels recovered to a modest degree, though at the second-slowest pace for three years. Some firms reported that they planned to increase staff numbers in hopeful anticipation of a surge in activity towards the end of the year. Business sentiment was moderately more positive than that seen in the immediate aftermath of the Brexit vote. After the shock of last month’s seven-year low in the overall index, the picture now is more about stabilisation than searing growth, as the sector remained in contraction. The housing sector continued its downward slide, but the drop in activity was much softer in August.’
The data had little initial impact on Sterling but the British currency is likely to remain supported heading into the weekend.
GBP/EUR was also little affected by the Eurozone’s Producer Price Index.
The monthly measure printed as expected in July at 0.1% but the annual figure of -2.8% was slightly better than forecast.
(Previously updated 08:00 02/09/2016)
Thursday’s UK data has had a considerable impact on this week’s Sterling Euro exchange rate forecast, with the pair now on track to make a considerable advance of over a cent this week. With August’s UK Manufacturing score coming in well above expectations, fears of the UK economy suffering before the Brexit process begins have calmed.
GBP/EUR began the week edging slowly higher from its opening levels of 1.1734, but has accelerated its advances each day and on Thursday alone jumped over half a cent. As a result, the pair has reached above the key level of 1.19, and on Thursday afternoon was trending at highs not seen since the first week of August.
Pound (GBP) Thrust Higher by August Manufacturing Activity
Pound (GBP) exchange rates extended their weekly gains on Thursday, surging by over half a cent against many major currencies within minutes thanks to an optimistic UK Manufacturing report from Markit.
Data collected throughout August was initially projected to continue July’s dire trend, a sudden downtick following Britain’s vote to Brexit from the European Union. Analysts estimated that the rate of contraction would narrow from 48.3 to 49.
However, the recent trend in UK data indicating something of a rebound from July’s lows continued with the nation’s Manufacturing PMI, with the print scoring surprising growth of 53.3 in August. The BBC reported;
‘The weakening of the Pound following the Brexit vote boosted exports, the survey found.
However, it also indicated that the weak Pound had pushed up firms’ costs. …
“The August PMI data indicate a solid rebound in the performance of the UK manufacturing sector from the steep downturn that followed the EU referendum,” said Rob Dobson, senior economist at IHS Markit.’
Dobson added that part of the reason for this increase in the manufacturing index was due to inflation, indicating that consumer prices could rise in the near future.
Sterling soared across the board in response to the news, with UK markets cheering the report and hoping that it indicated that the Brexit vote would not hit the British economy as badly as expected.
Euro (EUR) Weighed Down by Underwhelming Eurozone Stats
Euro sentiment continued to slump on Thursday, with investors of the shared currency feeling little drive to buy the currency amid poor data and rekindled speculation that the European Central Bank (ECB) could soon expand its monetary easing measures.
The Euro was previously undermined on Wednesday thanks to disappointingly low inflation estimates for August.
Economists had hoped that Eurozone inflation would reach 0.3% in August, but Wednesday’s estimates put inflation at a low 0.2%. This worried investors who had hoped that solid consumer prices could keep further ECB stimulus measures at bay.
Thursday’s data did little to cheer up gloomy Eurozone markets, as the Eurozone’s final August Manufacturing scores failed to meet preliminary scores of 51.8 – instead slipping to 51.7.
While Germany’s manufacturing score met preliminary figures, Italy and France’s were worse-than-expected. Italy’s was especially disappointing, falling from a preliminary score of 51.2 to below the contraction point of 50 with a score of 49.8. Reuters reported;
‘Also clouding the outlook, Britain – which is outside the currency bloc – voted in June to leave the European Union. Most of the economic impact so far has been within Britain, but survey compiler Markit said reduced sales to the country were partly to blame for the order book slowdown.’
Adding to concerns of the Brexit vote’s effect on the sector were comments from Markit Chief Economist, Chris Williamson;
‘There is some suggestion of a Brexit impact … and growth may wane further in September after new orders growth slipped to a one-and-a-half year low.’
Pound Euro Exchange Rate Forecast: Friday Data Unlikely to Deter Current Trends
Is the Pound Euro exchange rate forecast to continue its uptrend into the weekend? UK investors are particularly cheery this week thanks to the recent slew of data indicating that Britain’s economy has rebounded since July’s activity downtick.
Friday’s UK and Eurozone economic calendars are relatively bare, with the day’s only influential data set to be Britain’s August Construction PMI.
While the figure is expected to score a contraction of 46.5 from July’s score of 45.9, it should be noted that Britain has had construction struggles in 2016 since before the Brexit vote.
As a result, investors may not react considerably to the result unless Markit’s accompanying report reveals that the Brexit vote has had a considerable effect on the figure.
Eurozone data includes low-influence reports such as July producer prices and Italian Gross Domestic Product (GDP). The Euro is more likely to be influenced by Friday’s key US Non-Farm Payroll report.
If the US job market performed well below expectations in August, this could cause investors to flock away from the US Dollar towards major ‘Greenback’ rivals like the Euro, which would of course have a downward effect on Friday’s Pound Euro exchange rate forecast.