Finalised Eurozone Manufacturing PMIs Fail to Provide Rallying Point for Weakening Euro (EUR) Today
With the finalised German Manufacturing PMI coming in below forecast this morning, at 52.3 rather than 52.5, the single currency (EUR) has remained soft. Ahead of the corresponding UK figure the GBP/EUR exchange rate remains on a strong uptrend in the range of 1.3571.
Slowing German employment has maintained concerns over the economic health of the Eurozone this morning, leading the GBP/EUR exchange rate to make fresh gains.
Eurozone Deflation Fears Sparked Strong Upsurge for the GBP/EUR Conversion Rate as Prospects of ECB Loosening Grew
After the Pound (GBP) began to slump anew at the beginning of the week, the release of an improved UK Mortgage Approvals figure was of sufficient encouragement to prompt a strong rally from traders. Increasing significantly above forecast, going from 69,000 to 71,000, this indicated a decided upturn in the strength of the domestic housing market which helped to fuel suggestions that the Bank of England (BoE) might not be inclined to hold off on interest rates until later next year. This impression was substantially supported by a surprising surge on the CBI Reported Sales index, which clocked in at 49 rather than 28.
Faring significantly worse than its rival, the single currency (EUR) turned bearish as German Consumer Price Index data was revealed to have retreated further than had been anticipated. Of particular concern was the EU Harmonised CPI which printed at -0.2%, an unexpected return to deflation for the Eurozone’s economic powerhouse. Speculation rapidly rose that the European Central Bank (ECB) could be prompted to introduce fresh monetary loosening measures as a result of this data, with the implications grim for the rest of the currency union and its ability to weather the current global slowdown. Consequently, the GBP/EUR pairing surged to a daily peak of 1.3537.
Pound (GBP) Softened by Weak UK Consumer Confidence as Euro (EUR) Enters Slump on Rising German Unemployment
However, as UK Consumer Confidence was shown to have markedly fallen in September and member of the ECB Governing Council Jens Weidmann dismissed concerns over the possibility of deflation, it was not long before the common currency began to rally once more. With positive sentiment towards Sterling remaining limited the GBP/EUR conversion rate has struggled under the dominance of the resilient Euro.
As volatility remains the watchword of markets today, though, the release of German Unemployment Change data and its unanticipated rise of 2,000 has since seen the pairing return to a strong uptrend.
GBP/EUR Exchange Rate Forecast: UK PMIs Could Prove Pivotal for Pairing Movement
With major Eurozone data generally lacking in the rest of the week, the GBP/EUR conversion rate is likely to be driven primarily by the upcoming UK Manufacturing and Construction PMIs. Should these indicate continued recovery in the domestic economy, the Pound could be in for a more substantial resurgence, although weakening would undoubtedly see investor faith in the currency take another blow. Any particular rises in risk-aversion, or indicators as to the potential outcome of the Fed’s next rate decision, also stand to cause movement for the currency pairing.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was climbing strongly around 1.3509, with the Euro to Pound Sterling (EUR/GBP) pairing slumping at 0.7401.