GBP/EUR Exchange Rate Steady ahead of May’s Brexit Meeting
UPDATE: The Pound Euro (GBP/EUR) exchange rate is trading at its best levels since late June this morning as Sterling continues to be buoyed by hopes that the UK may be close to reaching a Brexit deal with the EU.
However this sentiment may be tested later today following a meeting between Theresa May and her cabinet in which the Prime Minister could see some push back from ministers regarding a rumoured plan for the UK to extend its time within the EU customs union.
In the meantime the Euro is holding its ground this morning as the Eurozone’s PMI figures were revised higher with the release of October’s final reading.
GBP/EUR Exchange Rate Bolstered by Hopes of a Brexit Deal
The Pound Euro (GBP/EUR) exchange rate roared higher last week, driven mainly by a renewed sense of Brexit positivity.
This sense of optimism was nowhere to be seen at the start of the week however, with Sterling retreating early in the session as persistent Brexit worries and an uninspiring Autumn Budget from Chancellor Philip Hammond saw GBP/EUR slide despite some underwhelming EU GDP figures.
Instead the Pound’s gains were concentrated in the latter half of the week’s session, starting with a rally late on Wednesday on suggestions by UK Brexit Secretary Dominic Raab that a Brexit deal could be finalised within three weeks.
More Brexit optimism occurred on Thursday amid reports that Theresa May had struck a tentative deal with the EU to provide UK financial services firms with continued access to European markets.
Following this up was a cautiously optimistic outlook from the Bank of England (BoE) following its November rate decision, which saw GBP/EUR briefly break through €1.14 on suggestions that a hike would be likely in the event of a smooth Brexit.
Pound Euro (GBP/EUR) Exchange Rate Gains Trimmed as UK Services PMI Disappoints
After roaring higher in overnight trade on the back of renewed Brexit optimism, the Pound Euro (GBP/EUR) exchange rate finds itself trading only slightly higher during the European session this morning as markets digest the UK’s latest Services PMI.
According to data published by IHS Markit, the UK’s service sector slowed markedly last month, with the index slumping from 53.9 to 52.2 in October, missing expectations of a more modest decline to 53.3 and causing growth to strike a seven-month low.
The disappointing result appeared to be largely driven by ongoing Brexit uncertainty, with business optimism falling to its lowest level since immediately after the EU referendum.
Most worrying however is when viewed alongside the UK’s other PMI releases it paints a bleak picture of fourth quarter growth.
Chris Williamson, Chief Business Economist at IHS Markit explains:
‘Combined with the manufacturing and construction surveys, the October services PMI points to the economy growing at a quarterly rate of just 0.2%, setting the scene for GDP growth to weaken sharply in the fourth quarter.’
GBP/EUR Exchange Rate Forecast: UK GDP to Jump in Q3?
Looking ahead to this week’s session, outside of Brexit the main catalyst for movement in the in Pound Euro (GBP/EUR) exchange rate looks set to be the release of the UK’s latest GDP figures at the end of the week.
Economists forecast that Friday’s preliminary reading will show that UK economic growth jumped from 0.4% to a more robust 0.6% in the third quarter, aided by some strong consumer spending over the summer.
Meanwhile EUR investors are likely to be focused on Germany this week as it releases a host of industrial data, with a dip in either factory orders or production in September likely to weaken the Euro for fear it may bode poorly for next week’s GDP reading.