Euro Forecast: Euro (EUR) Exchange Rates Falter Despite Record Low German Unemployment

Pound Sterling to Euro News: Mixed UK PMIs Support GBP/EUR Exchange Rate Gains

While the UK manufacturing PMI eased from 58.2 to 56.3 in December, Pound Sterling (GBP) exchange rates were still able to rally strongly during Tuesday’s European session.

Overall, the manufacturing sector performed well in the fourth quarter of 2017, boosting hopes that the economy will pick up further in 2018.

Even so, as the corresponding construction PMI also fell short of forecasts, the mood towards the Pound soon started to sour somewhat.

Further volatility is likely in store for GBP exchange rates on the back of Thursday’s services PMI report, given that the majority of UK economic activity is driven by the sector.

Any disappointment here could prompt a fresh slide for the Pound, especially as a significant degree of Brexit-based uncertainty continues to hang over the domestic outlook.

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Vulnerable to Cabinet Reshuffle Jitters

Even though things have been a little quieter on the UK political front over the New Year the Pound remains vulnerable to any domestic jitters.

Rumours over Theresa May’s anticipated cabinet reshuffle may see the GBP/USD exchange rate weaken in the coming days, with the Prime Minister’s position still looking rather fragile.

Sterling softness could also be in store if November’s UK net consumer credit figure points towards an increasing reliance on credit amongst domestic households.

As the Bank of England (BoE) has already expressed some concern over the recent rise in consumer credit, a fresh uptick could dent the odds of any imminent interest rate hike.

While rising credit has helped to maintain high levels of consumer spending, which have driven much of the UK’s economic growth in the wake of the Brexit vote, another increase is unlikely to be welcomed.

USD/GBP Forecast: Will Fed Minutes Boost USD Exchange Rates?

After ending 2017 on a weaker footing, the US Dollar has struggled to find much traction against its rivals this week.

Even so, recent data has painted a more encouraging picture of the domestic economy, with the Markit manufacturing PMI pointing towards solid sector expansion.

If December’s non-farm payrolls report proves similarly bullish, this could offer the US Dollar some degree of support, with investors likely to greet any fresh tightening of the labour market.

Focus will also fall on the Federal Open Market Committee’s (FOMC) latest meeting minutes, as markets speculate over the likely pace of monetary tightening over the coming year.

Any signs of dovishness may weigh heavily on USD exchange rates, especially if market risk appetite continues to improve in the meantime.

EUR/USD Outlook: Euro Exchange Rates Struggle to Capitalise on Bullish Eurozone Data

Germany’s unemployment rate unexpectedly fell to a fresh record low in December, with the November reading also revised down to 5.5%.

This failed to bolster the Euro, however, as its recent run of bullish momentum petered out on Wednesday morning.

While the Eurozone economy has continued to demonstrate robust health, with the latest manufacturing PMIs also bettering forecasts, EUR exchange rates were unable to maintain their gains for long.

Investors still expect the European Central Bank (ECB) to keep its quantitative easing program in place for the foreseeable future, limiting the upside potential of the single currency.

However, if the latest Eurozone consumer price index report points towards an increase in inflationary pressure on the year this could see the Euro rally ahead of the weekend.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail