GBP/EUR Exchange Rate Rangebound as June’s Eurozone Manufacturing PMI Remains in the Doldrums
The Pound to Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently trading around €1.10.
The Euro (EUR) struggled today after Germany’s unemployment rate for June continued to rise. The figure increased from 6.3% to 6.4%.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, commented:
‘The jump in claims over the last two months, coupled with the 0.5pp increase in unemployment in May, easily represent the most violent shifts in these data ever recorded.’
Today also saw the publication of the Eurozone’s Markit Manufacturing PMI for June. This improved to a better-than-expected 47.4 from May’s 46.9.
However, this left many EUR investors cold as the gauge remains lodged in contraction territory.
Chris Williamson, Chief Business Economist at IHS Markit,
‘The final PMI numbers for June add further to signs that the eurozone factories are seeing a strong initial recovery as the economy lifts from COVID-19 lockdowns.’
‘The focus therefore now turns to whether gains seen in the past two months can be built on, or if momentum fades again after this initial rebound.’
As a result, the EUR/GBP exchange rate struggled to gain this morning as the Eurozone’s economic recovery is still a long way off reassuring to EUR investors.
Pound (GBP) Steady Despite UK House Prices Falling in June
The Pound (GBP) held steady against the Euro (EUR) today after UK house prices fell to -1.4% month-on-month, leaving many investors concerned about Britain’s economic recovery going forward.
Lucy Pendleton of estate agents James Pendleton commented on the data:
‘Prices are down by a whisker annually but what is remarkable is how soft a landing the market has had given the scale of the disaster that has unfolded in the past few months.’
Meanwhile, today saw reports that UK factories are continuing to cut jobs. British manufacturers are becoming increasingly nervous about the long-term effects of Covid-19 on the economy.
The data firm IHS Markit reported that employment at UK factories had fell for their fifth consecutive month. It said:
‘Although the rate of decline eased further from April’s record it remained among the steepest registered in the 28-year survey history. There were reports of redundancies, cost control efforts, workforce restructuring and the non-replacement of leavers.’
GBP investors are also focusing on post-Brexit developments this week, with the UK and the EU having entered an important leg of negotiations. Consequently, some investors are feeling cautious as the two powers have shown little sign of progress towards a trade deal.
GBP/EUR Outlook: Could the UK’s Post-Brexit and Economic Woes Drag Down Sterling?
Euro (EUR) investors will be looking ahead to tomorrow’s release of the Eurozone’s Unemployment Rate gauge for May. Any signs of an increase would prove EUR-negative.
Pound (GBP) traders will be awaiting tomorrow’s UK GfK Consumer Confidence figure for June. If this improves, then we could se the GBP/EUR exchange rate begin to edge higher.
The GBP/EUR exchange rate will remain sensitive this week. Post-Brexit negotiations and the UK economy becoming an increasing concern for Sterling investors. Any signs that either one could deteriorate would threaten the UK economy and weaken the Pound.