Dovish International Monetary Fund (IMF) Growth Forecast Revision Dents Euro (EUR) as Pound (GBP) Strengthens
A generally positive assessment from the International Monetary Fund (IMF) of the prospects of the UK economy, at least compared to more dismal forecasts for Germany, France and Italy, has helped to buoy the Pound (GBP) this morning. At present the GBP/EUR exchange rate is trending strongly in the region of 1.3598.
Strengthened German Construction and Eurozone Retail PMIs have helped to boost the single currency (EUR) as Sterling (GBP) struggles to shake off the influence of a dovish UK Services PMI.
Weaker than Anticipated UK Services PMI Put GBP/EUR Pairing on a Downtrend as Euro (EUR) Strengthened
There was fresh disappointment in store for both the Pound (GBP) and the single currency (EUR) yesterday as a raft of Eurozone and UK PMIs failed to show improvement. While the UK Services PMI was expected to print at 56 the ultimate result was a significantly more dovish 53.3, raising concerns that the domestic economic recovery is experiencing a greater level of slowdown than previously thought. This saw Sterling weaken, driving the GBP/EUR exchange rate to a daily low of 1.3474, as traders were inclined to dial back their estimates for a Bank of England (BoE) interest rate rise.
Although Services and Composite PMIs for both Germany and the wider Eurozone equally fell short of forecasts this did not have a particularly adverse impact on the common currency, being quickly overshadowed by a more positive Eurozone Retail Sales figure. Still falling on the month, year-on-year sales in August were nevertheless higher than had been anticipated, at growth of 2.3% rather than 1.7%.
Improved Eurozone Retail and German Construction PMIs Shored up Common Currency (EUR) Today as Pound (GBP) Remains Bearish
With little UK data released on Tuesday, excepting declined Halifax House Price figures, Sterling has remained generally soft with the prime influence on the GBP/EUR currency pair being Eurozone economic releases.
While German Factory Orders fell short of forecasts this morning, at 1.9% rather than 5.6%, the Euro was not weighed down by the unimpressive report for long. Today’s Eurozone Retail and German Construction PMIs printed well to show positive expansion on the month. Offering some reassurance to traders concerned with the increasing indicators of local economic slowdown, these improved numbers seem to reduce the odds of fresh monetary loosening measures from the European Central Bank (ECB).
GBP/EUR Exchange Rate Forecast: Pound Hoping for Turnaround with UK Production Output Data
Tomorrow’s Industrial and Manufacturing Production figures could prove a rallying point for the struggling Pound, with expectations for limited upticks in output across both indicators. Though it is unlikely that these will be of sufficient encouragement to see pundits push their BoE rate hike bets forward Sterling would nevertheless benefit from signs of continued recovery in the domestic economy.
German Industrial Production data is also due for publication on Wednesday which may see a reversal in fortunes for the GBP/EUR conversion rate, should the result be sufficiently bearish to put a dent in the persistently buoyant Euro.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3539, while the Euro to Pound Sterling (EUR/GBP) pairing was in the range of 0.7386.