Strong Finalised Eurozone PMIs give Euro to Pound Sterling (EUR/GBP) Exchange Rate a Boost after Showing Growth in the Currency Bloc Economy Remains Robust.
Strong finalised December PMI readings for the Eurozone have helped keep the Euro in positive territory, although the Euro to Pound Sterling (EUR/GBP) exchange rate has been unable to escape from opening levels.
The latest slew of IHS Markit data for Italy, France, Germany and the Eurozone as a whole has been largely revised higher on preliminary estimates, although French services and composite indices have been fractionally lowered.
The overall composite index for the currency bloc was revised by 10 basis points to 58.1, marking the fastest pace of economic growth in nearly 7 years.
‘A stellar end to 2017 for the Eurozone rounded off the best year for over a decade, continuing to confound widely-held fears that rising political uncertainty would curb economic growth,’ said Chief Business Economist at IHS Markit Chris Williamson.
Taking into account the latest data, Williamson predicts that GDP will have accelerated in the fourth quarter of 2017 to 0.8%.
UK Service Sector PMI Beats Forecasts, but Pound Sterling (GBP) Remains on Soft Form
The latest UK services PMI has beaten expectations, but this has not been sufficient to push the Euro to Pound Sterling exchange rate into negative territory today.
The index for December was expected to rise from 53.8 to 54, but instead climbed to 54.2.
Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, commented;
‘Service providers retain an upbeat view of overall business prospects for the next 12 months, but the direction of travel is expected to be slow and steady over the course of 2018 which fails to excite anyone looking for greater returns.’
Looking beyond the headline figure, the latest PMI again reveals that there is great uncertainty regarding the future of the UK economy and questions as to whether the recent strength of the UK’s most important sector in terms of growth can be sustained.
Additionally, the latest consumer credit data has revealed a slowdown in the three months to November, with credit growing 8.5% compared to the 9.3% expansion seen in the three months to October.
This could be a sign that UK consumers are cutting back on their spending, further reducing the reasons to feel positive about this morning’s strong services data.
Will Euro (EUR) Exchange Rates Experience Downwards Pressure from US Labour Market Data?
With the day’s Eurozone and UK data having been released, movement for the Euro to Pound Sterling exchange rate is most likely to come from this afternoon’s US data.
The December ADP employment change figure could have a significant impact upon the US Dollar, as markets often see it as a bellwether for the following day’s non-farm payrolls report – a much more impactful release that can have a significant influence on the Federal Reserve’s decision regarding monetary policy.
A strong figure from the US jobs data could therefore boost appetite for the US Dollar, which would weaken the Euro thanks to the pair’s inverse correlation.
Should the data disappoint, however, the EUR/GBP exchange rate could receive a boost as markets, looking for a stable safe haven investment, flock to the Euro after selling out of the ‘Buck’.
Friday Slew Of Eurozone Data Forecast to Keep Euro in the Driving Seat of EUR/GBP Exchange Rates
With UK data thin on the ground tomorrow, the Euro’s reaction to the day’s numerous reports due from the currency bloc will be the primary driver of the EUR/GBP exchange rate.
Things start early with the November German retail sales figures, which are forecast to have recovered after October’s decline in order to post solid growth.
Germany’s construction PMI will be followed swiftly by Italian, French, German and overall Eurozone retail PMIs for December.
As plentiful as the morning’s data is, the releases listed so far will merely serve as a warm-up for the Eurozone consumer price data for December due at 10.00.
On the face of it, the data is largely expected to be positive, with the core index forecast to pick up from 0.9% to 1%.
However, as this would leave inflation at barely half the rate targeted by the European Central Bank (ECB), markets may not be overly impressed by a 10 basis point rise in price growth, assuming the data prints perfectly in line with the consensus amongst economists.