Pound Sterling Euro (GBP/EUR) Exchange Rate Falls as British Manufacturing Tumbles
The Pound Sterling Euro (GBP/EUR) exchange rate edged around -0.4% lower on Friday, leaving the pairing €1.1446.
The Pound edged lower despite Prime Minister Boris Johnson announcing the UK was now past its peak of the coronavirus crisis.
The Prime Minister also said his government would set out a ‘comprehensive plan’ for reopening the economy next week. Although, he also warned against the risk of a second spike which left GBP under pressure.
Meanwhile, this morning’s UK manufacturing PMI data revealed the sector continued to suffer in April.
April’s PMI came in at 32.6. The coronavirus pandemic caused huge disruption to the UK’s manufacturing sector and its supply chains.
Added to this, business sentiment remained close to record lows, dampening Sterling sentiment.
Commenting on this, IHS Markit’s Director, Rob Dobson noted:
‘UK manufacturing suffered its worst month in recent history in April, as output, orders books and employment all fell at rates far surpassing anything seen in the PMI survey’s 28-year history. Huge swathes of industry were hit hard by company closures, weak global demand, lockdowns and social distancing measures in response to COVID-19. The only pockets of growth were seen at firms making medical and food products.
‘The outstanding question remains how long the current restrictions will need to remain in place, and which sectors can start to safely reopen. The pressure is mounting, as the longer the global economy remains in lockdown the greater the cost to industry will grow, and the greater the likelihood that more jobs will be cut.’
Euro (EUR) Rises Following Thursday’s ECB Meeting
The single currency was able to make gains this morning, bouncing back at the end of the month. According to macro strategist at Wells Fargo, Erik Nelson:
‘It looks flow driven. Nothing has even come close to the move we’ve seen in the Euro.’
The Euro had earlier suffered some losses on Thursday after investors were disappointed by the European Central Bank’s (ECB) meeting.
Investors largely expected the bank would expand bond purchases to include junk bonds as part of its quantitative easing programme.
Vassili Serebriakov, UBS FX strategist noted that it was ‘a combination of weaker risk and short-term reaction to the ECB announcement that there would be no QE expansion’.
The single currency was able to edge higher despite the improvement in risk appetite as Wednesday saw the US Federal Reserve promise to expand emergency programmes as needed.
Investors are growing more optimistic that economies globally are closer to re-opening, and according to OANDA’s senior market analyst, Craig Erlam:
‘If we are seeing a bit of a rebound in risk, and I would say the last week or so has been quite encouraging on that front, then that would suggest that this would take some of the upward pressure off the Dollar.’
Pound Euro Outlook: Will Disappointing Manufacturing PMIs Weigh on EUR?
The Euro (EUR) could suffer some losses against the Pound (GBP) following the release of Monday’s PMI data.
If Germany’s final manufacturing PMI plummets further than expected in April, the single currency will tumble.
The Euro will suffer further losses if data from the wider Eurozone also reveals the bloc’s manufacturing output declined at a rapid pace.
Meanwhile, if traders remain optimistic further countries will announce plans to re-open their economies, risk appetite will improve.
A boost to risk sentiment is likely to support the riskier Sterling, and send the Pound Euro (GBP/EUR) exchange rate higher at the start of next week.