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Pound Euro (GBP/EUR) Exchange Rate Sinks as Eurozone Composite PMI Rises above Forecast

GBP/EUR Exchange Rate Falls as Eurozone Economy Picks Up

The Pound Euro (GBP/EUR) exchange rate fell today and is currently trading around €1.1218 on the interbank market.

The Euro (EUR) edged higher against the Pound following the printing of the flash Eurozone’s Markit PMI Composite figures for June, which came in above forecast at 52.1.

Chris Williamson, a Chief Business Economist at IHS Markit, commented:

‘The Eurozone economy picked up further momentum in June, with the headline PMI rising from the lows seen earlier in the year to hint that the worst of the current slowdown may be behind us… Germany and France are [also] showing improved performances compared to earlier in the year as one-off factors (such as the political unrest in France) continue to drop out of the picture.’

Today also saw the German Markit Manufacturing PMI figures for June, which showed some improvement by rising above the 44.5 consensus to 45.4, although failing to impress many investors as the figures still remain contracted.

Bert Coljin, a Senior Economist for the Eurozone at ING, said:

‘For the [European Central Bank], this PMI will surely have come as an encouraging sign, but as manufacturing weakness remains significant, it is unlikely to impact the state of high alert in  Frankfurt.’

GBP/EUR Exchange Rate Falls as Sterling Traders Brace for BoE Bulletin Report for Second Quarter

The Pound failed to rise against the single currency following the UK public sector net borrowing figures for May, which improved at £4.463bn.

Today will also see the Bank of England’s (BoE) quarterly bulletin report for the second-quarter, and with any signs of increasing dovishness from the central bank, we could see the GBP/EUR exchange sink further.

In political news, last night saw the ballot on the Tory leadership race, which saw Boris Johnson and Foreign Secretary Jeremy Hunt succeed, while Michael Gove was knocked out of the competition.

David Lidington, the de facto deputy Prime Minister, remained downbeat, however, saying:

‘The Tory party is facing some existential political challenges, and the union of the United Kingdom is under greater strain than I have never known it in my lifetime.’

Pound traders are becoming increasingly jittery as Brexit concerns begin to rise, and with the Leadership race now in its final leg, these may increase as the two possible leaders’ debates heat up.

GBP/EUR Forecast: Dovish Inflation Report Could Further Weaken Sterling

Euro traders will be looking ahead to Monday’s publication of the German IFO business climate figures for June, which are expected to improve.

These will be followed by the German IFO current assessment figures for Jun, and with any signs of improvement, this could see the Euro edge high still against Sterling.

Pound investors, meanwhile, will be focusing on Monday’s UK inflation report hearings report, and with any further comments of a dovish tone on the state of the economy, this could weaken the GBP/EUR exchange rate.