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Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: UK and Eurozone Data Support


The Pound Sterling to Euro (GBP/EUR) Exchange Rate Firms on UK PMI Release

Sterling firmed against the Euro on Wednesday as the latest UK Service sector Purchasing Managers Index (PMI) rounded off a run of better than forecast PMI reports. The data showed that the UK’s dominant sector expanded at a quicker pace than expected in the first month of the year and recovered from the slowdown recorded in December.

The GBP/EUR exchange rate hit a session high of 1.327

The Markit/CIPS compiled services PMI rose to a reading of 57.2 in January up from the preceding months figure of 55.8 (a 17-month low) and beat economist forecasts. The positive data adds to the positive Construction and Manufacturing PMI’s released earlier in the week and suggests that the UK economy will expand at a pace of 0.5% over the course of the quarter.

The data also suggests an improvement in the UK jobless rate as the pace of job creation in the service sector rose to its best level since last June and was the joint second highest pace recorded since the data was first compiled 19-years ago.

Following the release of the data, the Pound to Euro exchange rate hit a session high of 1.327

Eurozone Data Restrains Sterling

Further gains for the Pound were restrained however as data out of the Eurozone also came in positively. The Eurozone Composite PMI, which combines activity in the construction, manufacturing and service sectors, activity in the Eurozone increased by its fastest pace in six months.

‘The Eurozone enjoyed a positive start to 2015, as growth of economic activity accelerated among the big-four nations. Output expanded in Germany, Italy and Spain, but the downturn in the French economy extended into its ninth month,’ Markit said.

Also supporting the single currency was a separate report, which showed that retail sales in the Eurozone rose for a third consecutive month in December and rose by the fastest annual pace in nearly eight years.

The report suggests that falling oil prices are bolstering consumer spending and aiding economic growth.

On a month on month basis, retail sales rose by 0.3% and jumped by 2.8% on an annual basis in December.

The GBP/EUR exchange rate will likely experience volatility on Thursday as the market turns its attention to the latest Bank of England interest rate decision. Policy makers are expected to leave rates unchanged and maintain the monthly quantitative easing programme at £375 billion.

Factory orders data out of Germany could support the Euro and investors will want to keep an eye on events in Ukraine and the negotiations between Greece and its lenders.

Euro Exchange Rates:

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.1444 ,
Euro,,British Pound,0.7533 ,
Euro,,Australian Dollar,1.4645 ,
Euro,,Canadian Dollar,1.4232 ,

As of 11:50 am GMT