British Pound (GBP) Exchange Rate Forecast to Soften against the Common Currency (EUR) after UK Manufacturing Growth Slower-than-Expected
The Pound Sterling to Euro (GBP/EUR) exchange rate dived by around -0.4% on Tuesday morning.
In general, the Pound is trending lower against its currency competitors despite hawkish comments from Bank of England (BoE) Governor Mark Carney. Carney suggested that the British economy is on track to cope with a rate hike in the first-quarter of 2016 and the situation in China will not deter the Monetary Policy Committee (MPC) from this goal. This caused the Pound to rally initially, although profit-taking and mixed results from economic data weighed on demand and the Pound has since depreciated.
Of particular disappointment was the UK Manufacturing PMI, which came in at 51.5 in August and missed the median market projection of 52. Rob Dobson, Senior Economist at survey compilers Markit, stated; ‘The UK manufacturing sector remains in a holding pattern, with production growth hovering around the stagnation mark and marginal job losses reported for the first time in 26 months. On this basis, the sector looks unlikely to make much of a contribution to the solid gain in broader GDP growth expected for the third quarter. On the price front, input costs fell at one of the sharpest rates during the past 16 years and selling prices were broadly unchanged.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3630.
Euro (EUR) Exchange Rate Forecast to Strengthen against the British Pound (GBP) on Damp Market Sentiment
The common currency advanced versus most of its major peers on Tuesday morning after poor manufacturing activity in China caused heightened demand for safe-haven assets. Although many economists have shown concern that Euro price pressures will cause the European Central Bank (ECB) to expand monetary policy, generally positive signs regarding the Eurozone’s economic standing has somewhat micrified those concerns.
European jobs data produced positive results on Tuesday which aided the single currency uptrend. The German Unemployment Rate came in at 6.4% in August, meeting with the market consensus. Italian Unemployment, however, eclipsed the median market projection of a rise from 12.5% to 12.7%, with July’s actual result dropping to 12.0%. July’s Eurozone Unemployment Rate came in at 10.9%; bettering the market forecast 11.1%.
The Pound Sterling to Euro (GBP/EUR) exchange rate has fallen to a low of 1.3559 during Tuesday’s European session.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Losses ahead of UK Construction PMI
Given the absence of further data publications pertaining to either the UK or the Eurozone, and with heightened demand for safe-haven assets, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold losses for the remainder of Tuesday’s European session.
Wednesday is likely to see GBP/EUR volatility with the Markit/CIPS UK Manufacturing PMI for August. Eurozone Producer Price Index reports for July may also have an impact on the pairing. However, market sentiment and developments in China will likely continue to dominate trader focus.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3687 during Tuesday’s European session.