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Volatility Forecast for GBP/EUR, GBP/USD Exchange Rates After Raft of Manufacturing PMIs

Falling German Unemployment Fails to Rally Weakened Euro (EUR) Today

Although the latest German Unemployment Change figure showed that the number of unemployed had fallen by 14,000 in December the Euro (EUR) has remained on a bearish trend on Tuesday morning. While the US Dollar (USD) has been recovering ground after yesterday’s discouraging ISM Manufacturing Survey the Pound (GBP) is on generally weaker form. Consequently the GBP/EUR exchange rate has been trending in the range of 1.3612 and the GBP/USD pairing is trending lower at 1.4691.


German Inflation Disappoints Expectations to Soften Euro (EUR) against Pound (GBP), US Dollar (USD) Today

Following a discouraging German inflation report the Euro (EUR) has weakened against rivals this afternoon, with the likelihood of the European Central Bank (ECB) loosening monetary policy further denting demand for the single currency. Consequently the GBP/EUR exchange rate has regained its earlier losses to trend in the region of 1.3598, while the EUR/USD pairing has slumped sharply to 1.0799.


Demand for the Pound (GBP) has remained weaker on Monday morning after the latest manufacturing data further dampened the outlook of the UK economy, while the Euro (EUR) has benefitted from a surge in risk aversion.

Pound Sterling Currency News: Bearish Outlook for GBP as UK Manufacturing PMI Disappoints Forecast

It has been a less than impressive start to the New Year for the Pound Sterling (GBP) as the latest UK Manufacturing PMI disappointed expectations. Slipping from 52.5 to 51.9 on the month in December, as domestic production slowed towards the end of 2015, this weaker performance has led to suggestions that the fourth quarter GDP could equally print lower. As domestic Mortgage Approvals surprised on the upside, traders have also shown increasing concern with the persistent acceleration of the housing market, offering little incentive to favour Sterling over its rivals today.

However, should Wednesday’s Services PMI demonstrate continued strength the Pound may see a renewed surge in demand, as the sector forms the greatest single contribution to the nation’s GDP and could outweigh other weak data.

Euro (EUR) Exchange Rates Trend Higher after Eurozone Manufacturing PMIs Better Expectations

The Euro to Pound Sterling (EUR/GBP) exchange rate has been bolstered this morning by a raft of improved Eurozone Manufacturing PMIs, in spite of the French sector falling short of expectations with weaker growth than anticipated. Of particular note were the stronger-than-expected performances in both the Italian and Greek manufacturing sectors, the latter of which meaning that all members of the currency union experienced an expansion in production at the end of 2015. With confidence in the Eurozone’s economic prospects heightened, the single currency (EUR) also benefitted from a disappointing Chinese Manufacturing PMI, and the early closure of the Shanghai stock market due to a 7% drop in share prices, which has seen an increase in safe-haven demand.

US Dollar (USD) Softens Today as Weak Chinese Data Suggests Greater Fed Caution

Members of the FOMC have continued to take a more hawkish tone this week, as Vice Chairman Stanley Fischer suggested that the central bank may be prompted to increase interest rates faster if markets begin to show signs of overheating. Nevertheless, the US Dollar (USD) has weakened against the Pound on Monday morning as traders have reacted negatively to the latest signs of economic weakness in China and the downside risks of any further slowdown.

However, as the latest US Manufacturing Survey is expected to show a strengthening within the domestic economy the ‘Greenback’ could be expected to rally latter on this afternoon, with a stronger showing likely to outweigh the impact of more negative global headwinds.

Current GBP, EUR, USD Exchange Rates

At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending lower in the region of 1.3546, while the Pound Sterling to US Dollar (GBP/USD) pairing was making gains around 1.4794. Meanwhile the Euro to US Dollar (EUR/USD) exchange rate was climbing at 1.0921.