With the UK’s Manufacturing PMI far exceeding expectations, the Pound Sterling to Euro exchange rate surged, hitting a new high of 1.1916. However, the pairing has since eased slightly lower and whether or not GBP/EUR ends the week notably up from the week’s opening levels largely depends on the day’s UK Construction PMI. A better-than-forecast result would give the Pound another boost.
- Pound Sterling Euro Exchange Rate Hits 1.19 – Could it rally beyond this level?
- Eurozone CPI Estimate at Low 0.2% in August – Could spell trouble for the ECB
- August UK PMI Results Impress – Manufacturing returns to growth
- Forecast: Will the European Central Bank Ease Further? – Low inflation is bad news for ECB
Pound Sterling Euro Exchange Rate Returns to 1.19
The Pound once again surged against the Euro on Friday afternoon as investors readjusted their levels on the week’s news.
While the US Dollar’s Thursday weakness benefited the Euro on Thursday, this trend did not continue on Friday even as the US Dollar was sold off once more amid an underwhelming Non-Farm Payroll report.
August’s NFP report printed a worse-than-expected employment change of 151k, and the unemployment rate failed to improve to 4.8% as forecast. This left the US Dollar weaker.
However, as the week’s Eurozone news was also underwhelming, markets saw little reason to buy into the Euro on Friday with under a week until the European Central Bank’s (ECB) September policy meeting.
As British data has been more optimistic than expected in the last week, GBP/EUR was able to easily advance, once again holding around the key level of 1.19.
(Previously updated 9:26 BST 02/09/2016)
Pound Sterling Euro Exchange Rate Nears 1.19
The Pound to Euro exchange rate was unable to hold its highest levels on Thursday afternoon, but trended almost a cent above the day’s opening levels regardless as Sterling demand remained high across the board.
GBP/EUR was weakened slightly on Thursday afternoon by the latest US news, with a series of August US PMIs printing heavily disappointing figures that led to a decrease in US Dollar demand.
With global markets so focused on Fed rate hike bets this week, this news was enough to sent USD investors flocking towards the Euro, one of the US Dollar’s biggest rivals.
This allowed the previously weak Euro to recover slightly from its worst levels – however the Euro lacked any strong Eurozone data to hold its ground with, meaning this strength is likely to be temporary.
This trend could continue on Friday, and GBP/EUR could trend to 1.19 and beyond unless Britain’s August Construction PMI results in a surprisingly poor score.
(Previously updated 14:40 BST 01/09/2016)
As Thursday’s European session continued the Pound Sterling to Euro exchange rate jumped to 1.1900, climbing over 1% on the day’s opening levels as investors responded to the news that the UK’s manufacturing sector returned to growth in August.
The PMI gauge advanced from 48.3 to 53.3 in August, far surpassing expectations for a reading of 49.
The Pound also advanced on the US Dollar, Australian Dollar and New Zealand Dollar after the report was released.
According to Markit economist Rob Dobson; ‘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. Companies reported that work that had been postponed during July had now been restarted, as manufacturers and their clients started to regain a sense of returning to business as usual. The domestic market showed a marked recovery, especially for consumer products, while the recent depreciation of sterling drove higher inflows of new business from the USA, Europe, Scandinavia, Middle East and Asia.’
Meanwhile, David Noble of the Chartered Institute of Procurement & Supply stated; ‘The Brexit brakes are off, as the sector surged ahead with the PMI hitting a 10-month high reflecting rapid expansions in both activity and new orders. Fuelled by a combination of export and domestic orders, the increase in the level of the headline PMI equalled its best during the survey’s quarter of a century history.’
Whether or not the Pound Euro exchange rate rally continues largely depends on how tomorrow’s UK Construction PMI prints. If that measure also surprises to the upside Sterling could push higher still before the weekend. As it stands, economists have forecast that the measure improved from 45.9 to 46.5.
(Previously updated 08:00 GMT)
The Pound Sterling Euro exchange rate fluctuated widely on Wednesday as investors remained more optimistic about the UK’s post-Brexit prospects. The Euro was also weakened by underwhelming Eurozone stats throughout the day, such as low August inflation. Ahead of the release of the UK’s manufacturing PMI, the Pound Sterling Euro exchange rate was trending in the region of 1.18. A better-than-forecast result could send GBP EUR to new best levels.
GBP/EUR fluctuated with an upward bias on Wednesday, but struggled to hold its best levels despite briefly reaching highs of above 1.18. In the afternoon, the pair fluctuated in a wide range between 1.1750 and 1.1780.
So far it’s been a solid week for the Pound, although the currency remains one of the worst performing currencies of 2016 and recorded a fourth consecutive month of declines against the US Dollar.
Pound (GBP) Fluctuates Higher on Short Positions
The Pound continued the week’s rally on Wednesday, surging on a couple of occasions as investors continued to rearrange their positions on the volatile Pound.
Sterling’s appeal was boosted slightly on Wednesday morning by the latest UK ecostats. These included GfK’s August consumer confidence survey report and Nationwide’s latest house prices report.
Consumer confidence scored a shocking -12 in July, and was expected to lighten to -8 in August. However, the figure instead lightened to -7, indicating that confidence would not continue to plummet as far as analysts predicted.
House prices surged, despite projections that they would instead slow. Prices improved from 5.2% to 5.6% month-on-month, beating an expected slow to 4.8%. The yearly figure beat forecasts of -0.2% by improving from 0.5% to 0.6%.
However, these figures weren’t enough to give Sterling a solid footing, and much of its Wednesday gains were due to a record number of short positions on the Pound being bought.
These volatile bets against the value of the Pound to US Dollar exchange rate indicate that a considerable amount of investors expect Sterling to lose value, accounting for the currency’s wide fluctuations throughout the day.
Euro (EUR) Undermined by Mixed Eurozone Datasets
The Euro’s recent rally may be well behind it now, as Wednesday’s data revealed that investors still had little to be cheery over when it came to the Eurozone’s economic activity.
Data from Germany, the Eurozone’s biggest economy, was mixed with German retail sales improving by 1.7% in July but coming in at -1.5% year-on-year. On the other hand, German unemployment fell by -7k in August, beating forecasts of -4k. The unemployment rate remained at 6.1%.
General Eurozone data was largely disappointing however. July’s Eurozone unemployment rate failed to improve to 10% as some analysts expected, instead remaining at 10%.
But perhaps the worst news of the day for the Eurozone was the bloc’s August Consumer Price Index estimates. According to the print, inflation was set to come in at 0.2% year-on-year in August, letting down an improvement to 0.3%.
This is notable as it has indicated to some that the European Central Bank’s easing measures have not been successful enough at stimulating inflation. The Guardian reported;
‘Speculation is growing that the European Central Bank could take action to stimulate the Eurozone economy after official figures showed an easing in underlying inflation last month.
Pressure on the ECB increased when the European commission’s statistical agency, Eurostat, published figures that showed core inflation in July was lower than in same month last year, despite aggressive action by the Frankfurt-based bank over the past 18 months.’
Pound Sterling Euro Exchange Rate Forecast: Britain’s August PMIs Ahead
With the Pound to Euro exchange rate still trending in a wide range despite Wednesday’s key Eurozone ecostats, it is unlikely that the GBP/EUR exchange rate will be pushed lower by the Euro this week.
The shared currency’s chance to strengthen has come and gone this week, and investors are now in a position of speculation on whether or not the European Central Bank (ECB) will act further on monetary stimulus policy in its September meeting.
As a result, the Euro could either continue to weaken for the remainder of the week, or Sterling could be undermined by disappointing UK news.
The remaining UK datasets this week are Markit’s August Manufacturing PMIs, due for publication on Thursday, and Markit’s Construction PMIs on Friday.
Both of these figures are expected to have improved slightly since July, which would continue the recent trend of Britain’s August data rebounding slightly from July’s downtick. If they come in worse-than-expected however, the Pound could quickly give up most of its weekly gains.
The Euro also has a chance to drive the Pound Sterling Euro exchange rate on Thursday morning if August’s Final Eurozone Manufacturing PMIs miss forecasts in some way.