GBP/EUR Exchange Rate Rangebound as Concerns Remain for Eurozone’s Economic Recovery
The Pound to Euro (GBP/EUR) exchange rate held steady today, with the pairing currently trading around €1.109.
The Euro (EUR) failed to gain on Sterling today following the release of the Eurozone’s PMI Composite figure for June, which edged higher from 47.5 to 48.5. As a result, single currency traders are becoming more optimistic about the bloc’s economic recovery.
Chris Williamson, the Chief Business Economist at IHS Markit, commented on the report:
‘The headline eurozone PMI surged some 17 points in June, a rise beaten over the survey’s 22-year history only by the 18-point gain seen in May. The upturn signals a remarkably swift turnaround in the eurozone economy’s plight amid the COVID-19 pandemic.’
Today also saw the release of the French PMI Composite for June, which beat forecasts and rose to 51.7.
Yesterday also saw better-than-expected employment figures, which has further boosted the chances of the Eurozone’s economic recovery in the months ahead.
Eurostat report that unemployment in the Eurozone had risen to 7.4% in May.
Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, was more cautious in his analysis, saying:
‘The headline jobless data currently are distorted beyond recognition by two issues. First, workers furloughed by governments’ job-retention schemes count as employed, and we don’t know how many of them will face outright unemployment until these measures are phased out entirely. That will take some time.’
Pound (GBP) Steady as UK Services PMI Continues to Stagnate in May
The Pound (GBP) struggled today after the UK Services PMI for May continued to stagnate, with the figure rising marginally from 47 to 47.1. Consequently, investors have become more concerned about Britain’s economic recovery
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, was gloomy in his analysis, commenting:
‘As the sector regains some momentum, employment levels amongst services personnel remain deeply concerning. Businesses securing their premises to ensure Covid safety for staff and customers means operating costs are rising. Some firms are resorting to heavy discounting, others accelerating innovative solutions to change their operating model to stay in business. For others, the decision to shed jobs may be the only solution as the fight for survival continues and the UK economy grits its teeth for the months ahead.’
Meanwhile, Brexit developments have remained at the fore this week. However, investors have become increasingly concerned about the British economy’s future after Michel Barnier, the EU’s Chief Brexit Negotiator, bemoaned Britain’s response to post-Brexit negotiations.
As a result, the Pound has remained under pressure as the economy is hit from two sides, with coronavirus and post-Brexit concerns weighing on confidence in Sterling.
GBP/EUR Outlook: Could Improving German Factory Orders Boost the Single Currency?
Euro (EUR) investors are looking ahead to Monday’s release of Germany’s factory orders figures for Many. If these confirm consensus and rise in May, then we could see EUR rise.
Monday will also see the release of the Eurozone’s retail sales figures for May, which are expected to remain in the doldrums at -22.3%.
Meanwhile, Sterling investors will be looking to Monday’s release of the final Construction PMI for June. If this continues to remain deeply in contraction territory, then we could see the GBP fall.
The GBP/EUR exchange rate will remain sensitive to Brexit and coronavirus developments next week. Any signs of UK-EU trade talks becoming problematic would prove GBP-negative.