The Pound to Euro exchange rate (GBP/EUR) has risen this afternoon, thanks to supportive UK construction sector data.
June’s construction PMI reading has shown unexpected growth during the month, which has boosted confidence among GBP traders.
Summing up the good news, Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said:
(Last updated 3rd July, 2018)
The Pound (GBP) has advanced against the Euro (EUR) this afternoon, thanks to growing uncertainty about future trading conditions.
Fears that the EU could be hit with tariffs like those imposed against China have lowered confidence levels among Euro traders today.
The latest development has been US President Donald Trump’s likening of EU trade policy to China’s, which has alarmed onlookers.
Signalling that the European Commission (EC) won’t take any aggression lying down, a recently released EC paper reads:
‘The European Union would caution the US against pursuing a process which could result in yet another disregard of international law, which would damage further the reputation of the US and which the international community cannot and will not accept.’
(Last updated July 2nd, 2018)
Marginal Rise in UK Manufacturing Sector Pushes GBP/EUR Exchange Rate Higher
The reading for June has risen from 54.3 points to 54.4, beating forecasts for a slowdown to 54 points.
IHS Markit Director Rob Dobson responded cautiously to the news, saying:
‘How likely such a revival is remains in some doubt, with the June survey seeing business optimism drop to a seven-month low amid rising concerns about possible trade tariffs, the exchange rate and Brexit uncertainty.
‘With industry potentially stuck in the doldrums, the UK economy will need to look to other sectors if GDP growth is to match expectations in the latter half of the year.’
Suggested ‘Third Model’ for Customs Union Fails to Boost GBP/EUR Exchange Rate
In less concrete news, the Pound (GBP) hasn’t been affected much by the latest Brexit news, despite its positive implications.
Prime Minister Theresa May has apparently devised a third option for post-Brexit customs management, which might be more acceptable to EU officials.
Customs deals are highly important to the UK after Brexit, specifically pertaining to the state of the Irish border.
The two current suggestions have failed to gain approval in the UK or EU, but this third way may bring a breakthrough in negotiations if it is deemed acceptable.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Losses Persist on Static Eurozone Unemployment Rate
The Euro (EUR) has dipped against the Pound (GBP) this morning, following the news that Eurozone unemployment levels have remained at 8.4% during May.
This was a forecast-beating result, as economists had predicted that levels of unemployment would rise to 8.5%.
Despite the better-than-expected news, the Euro has been weakened today by disappointing Eurozone manufacturing stats.
Finalised figures for June have confirmed that French, German and Eurozone-wide manufacturing PMIs declined last month, indicating a slower pace of activity.
Commenting on the overall Eurozone reading, IHS Markit Chief Business Economist Chris Williamson said:
‘Eurozone manufacturing reported its weakest expansion for one-and-a-half years in June, with risks clearly tilted towards output growth waning further in coming months.
‘Production growth has weakened markedly since the end of last year, and new order inflows have slowed even more.’
Weekly Pound to Euro Forecast: Will GBP/EUR Exchange Rate Rise on Strong Services PMI?
This week will bring a number of high-impact UK and Eurozone economic data releases; the next piece will be Tuesday morning’s UK construction PMI for June.
Like today’s manufacturing sector reading, this is forecast to show a slight slowdown in sector activity, which could lower confidence among GBP traders.
Despite the risk of a GBP/EUR decline on Tuesday, the Euro may also trade lower because the morning’s Eurozone retail sales data is tipped to show a slowdown.
Moving onto Wednesday, the morning will bring the biggest UK economic data of the week, June’s UK services PMI.
This is currently forecast to show no change in activity levels, but such a result is not guaranteed.
If the services PMI increases then the Pound Sterling to Euro exchange rate (GBP/EUR) could rise sharply.
The services sector is the single largest contributor to UK economic growth, so a major rise might counter poor construction and manufacturing PMI data.