GBP/EUR Exchange Rate: Underwhelming Manufacturing PMI Dents Sterling Demand
A weaker-than-expected UK manufacturing PMI left the Pound on a relatively weak footing this week, with the index falling to a three-month low at the start of the third quarter.
This did not give investors any particular cause for confidence in the outlook for the UK economy, especially as signs point towards a continued deterioration in new orders and output growth.
However, as the manufacturing sector only accounts for roughly 10% of UK economic activity this softer showing could easily be outweighed by a stronger services PMI.
If Friday’s service sector data proves positive the mood towards the Pound is likely to improve, with signs of resilience here triggering some market optimism.
GBP/USD Exchange Rate: Pound Holds Ground on High BoE Interest Rate Hike Odds
Speculation ahead of the Bank of England’s (BoE) August policy decision has helped to limit the downside potential of GBP exchange rates.
With high odds of an imminent interest rate hike already priced into Pound Sterling this has kept GBP exchange rates shored up during the early week.
Even so, the Pound is vulnerable to sharp losses if the tone of Thursday’s policy statement and the quarterly Inflation Report lean more towards dovishness.
If the BoE fails to deliver a rate hike, meanwhile, GBP exchange rates could see significant losses ahead of the weekend.
USD/GBP Exchange Rate: US Dollar Muted Ahead of Federal Reserve Policy Announcement
A surprise downward revision to June’s US personal consumption expenditure core data limited demand for the US Dollar, suggesting that domestic inflationary pressures are easing.
Tonight’s Federal Open Market Committee (FOMC) policy announcement is likely to provoke limited volatility for USD exchange rates, with markets expecting no shift in policy at this stage.
Any signs of greater caution among Fed policymakers could put the US Dollar under some fresh pressure, though.
Another solid showing from the US non-farm payrolls report for July may give USD exchange rates a boost on Friday, on the other hand.
EUR/USD Exchange Rate: Signs Point towards Weaker Eurozone Economic Growth
The Euro found little cause for encouragement on the back of the latest finalised raft of Eurozone manufacturing PMIs, which indicated that the sector got off to a weak start in the third quarter.
Following on from a surprise weakening in the second quarter Eurozone gross domestic product, EUR exchange rates have been left on a softer footing.
Unless July’s finalised services PMIs paint a more encouraging picture of the currency union’s economic health the single currency may struggle to find much in the way of demand this week.
However, as forecasts point towards another solid month of Eurozone retail sales this may help to bolster the appeal of the Euro on Friday.