Pound Euro Exchange Rate Muted as UK Manufacturing Sector Slashes Jobs

GBP/EUR Exchange Rate Subdued Following UK Factory PMI

The Pound to Euro (GBP/EUR) exchange rate is trading in a narrow range this morning as markets respond to the UK’s manufacturing PMI and the Eurozone’s CPI figures.

At the time of writing the GBP/EUR exchange rate is trading at around €1.273, virtually unchanged this morning.

Pound (GBP) Muted Following Mixed Factory PMI

The Pound (GBP) is holding steady this morning after the UK’s latest manufacturing PMI made for some mixed reading.

IHS Markit reported the UK’s manufacturing index climbed from 47.4 to 48.3 in September, beating expectations it would slip to just 47.

While the index suggests that growth in the factory sector is contracting at a slower pace than previously, analysts warned the headline figures masked some underlying weakness.

These concerns were mostly focused on falling orders as well as a sharp fall in employment levels, both of which appeared driven by ongoing Brexit uncertainty.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said:

‘Export orders dwindled for the sixth successive month, and domestically, clients avoided spending and investing in this current landscape of prolonged uncertainty and political indecision.

‘This exhausting set of conditions meant companies shed jobs at a rate not seen since 2013 as redundancy packages were prepared and new staffing plans abandoned.’

Brock also warned that alongside Brexit, increased global headwinds due to the US-China trade dispute and potential disruptions to oil supplies could see this weakness carry through into the fourth quarter.

Euro (EUR) Subdued as Eurozone Inflation Nears a Two-Year Low

At the same time, the Euro (EUR) is also struggling to find support this morning following the publication of the Eurozone’s latest Consumer Price Index (CPI).

According to a flash CPI estimate published by European statistics agency Eurostat, headline inflation fell to just 0.9% in September.

The slide follows the preliminary release of Germany’s CPI figures on Monday, which revealed inflation in the Eurozone’s largest economy fell to just 1.2%.

While underlying inflation showed some improvement, rising from 0.9% to 1% last month, this is still well below the European Central Bank’s (ECB) target rate of 2%.

GBP/EUR Exchange Rate Forecast: Draghi to Speak Later

Still to come today is a speech by outgoing ECB President Mario Draghi later this evening, which could potentially influence the Pound to Euro (GBP/EUR) exchange rate.

In one of Draghi’s final public appearance before he steps down as ECB President at the end of the month, he is expected to again defend his decision to resume the bank’s quantitative easing programme despite some significant opposition from amongst policymakers.

Meanwhile, GBP investors will be on the lookout for any developments regarding Brexit, after Boris Johnson’s dismissed reports the government was preparing to publish the legal text of an updated Brexit deal it hoped to put before the EU.

Matthew Andrews

Contact Matthew Andrews