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Pound Sterling to Euro (GBP/EUR) Exchange Rate Ticks Higher despite Construction Sector Slump

Disappointing UK Construction PMI Reading Fails to Prevent GBP/EUR Exchange Rate Rise

The Pound Sterling (GBP) to Euro (EUR) exchange rate has made a minor rise today, hitting a level of €1.1093 on the interbank exchange rate.

Given recent losses in the GBP/EUR pairing, this represents a recovery for the Pound; Sterling previously hit a high of €1.1253 against the Euro during August.

Today’s UK construction PMI has been distinctly unsupportive, so current GBP/EUR exchange rate gains are mainly down to the Euro being the weaker currency.

Covering August, the measure of UK construction sector activity has fallen from 55.8 points to 52.9, below the anticipated 55 point reading.

Commenting on this deterioration in the construction sector, IHS Markit Associate Director Tim Moore said:

‘The construction sector slipped back into a slower growth phase in August, with this summer’s catchup effect starting to unwind after projects were delayed by adverse weather at the start of 2018.’

Slower construction activity puts increased pressure on the UK’s housing supply, which makes finding homes for the growing population problematic.

Euro to Pound (EUR/GBP) Exchange Rate Weakened by Manufacturing Sector Upset

The Euro (EUR) has made a minor loss against the Pound (GBP) today, following Monday’s news of disappointing manufacturing sector activity.

Finalised figures for August showed a decline from 55.1 points to 54.6; although this matched up with forecasts, the result still unsettled Euro traders.

IHS Markit also compiles Eurozone PMI data and Chief Business Economist Chris Williamson said of the data:

‘Eurozone factories reported a further solid production gain in August, but prospects dimmed further as growth of new orders hit a two-year low and worries about the outlook deepened.

‘The slowdown in demand compared to the surging pace of expansion seen earlier in the year is being driven primarily by export orders rising at the slowest rate for nearly two years.’

Future Pound Sterling to Euro Forecast: Will Higher UK Services PMI Boost GBP/EUR Exchange Rate?

The Pound (GBP) could rise sharply against the Euro (EUR) on Wednesday morning, depending on how August’s high-impact UK services PMI prints.

The measure of services sector activity is currently expected to rise from 53.5 points to 53.9, which could be enough to boost demand for Pound Sterling.

While a small rise, a forecast-matching increase could still trigger GBP/EUR exchange rate gains because of the positive implications for UK economic growth.

The services sector covers areas such as financial services, retail sales and tourism; a higher reading is positive for UK economic stability.

Euro traders will also be looking out for Eurozone services PMI data on Wednesday, alongside later retail sales figures.

Current expectations are for a slight rise in services activity and year-on-year retail sales in July, but a monthly sales slowdown could limit Euro gains on such news.