Pound to Euro (GBP/EUR) Exchange Rate Steady as UK Services Sector Begins to See ‘Light at the End of the Tunnel’

GBP/EUR Exchange Rate Rangebound as UK New Car Sales Rise in July

The Pound to Euro (GBP/EUR) exchange rate held steady today, with the pairing currently fluctuating around €1.10.

Sterling held steady following the publication of the UK’s new car sales figures for July, which rose roughly 11% year-on-year.

Andy Barratt, managing director of Ford of Britain, was more cautious in his analysis, however, saying:

‘I think that there will be reasonable demand through September, when the registration plate changes, but without government intervention this sector won’t recover until at least the middle of next year.’

Today also saw the publication of the final UK services PMI for July, which undershot forecasts and fell from 56.6 to 56.5. Nevertheless, this relatively strong performance in the UK’s largest sector has buoyed hope for Britain’s economic recovery going forward.

Tim Moore, Economics Director at IHS Markit, was also upbeat about today’s data, saying:

‘UK service providers are starting to see light at the end of the tunnel after a record slump in business activity during the second quarter of 2020. July data revealed the fastest increase in business activity for five years, which adds to signs of recovery across the manufacturing sector this summer.’

Euro (EUR) Steady as Eurozone Services Sector Rebounds in July

The Euro (EUR) struggled today following the release of the final German PMI composite data for July. With the figure falling below consensus from 55.5 to 55.3, EUR investors have become concerned for the Eurozone’s powerhouse economy.

Today also saw the release of the Eurozone’s PMI composite figure for July, which beat forecasts and rose from 54.8 to 54.9.

Chris Williamson, Chief Business Economist at IHS Markit, commented:

‘Eurozone service sector business activity rebounded in July to grow at a rate not exceeded for over two years. France and Germany enjoyed especially strong gains though renewed growth was also recorded in Spain and Italy as COVID-19 containment measures continued to be relaxed.’

The Euro (EUR) benefited from a better-than-expected Eurozone retail sales data for June. The figure rose from -3.1% to 1.3% year-on-year, while the month-on-month figure fell below forecasts at 5.7%.

GBP/EUR Forecast: Could a Dovish BoE Drag Down Sterling on Thursday?

Pound (GBP) investors are looking ahead to tomorrow’s interest rate decision from the Bank of England (BoE). The Bank is expected to hold interest rates at 0.1%, however, a downbeat monetary policy report would prove GBP-negative.

Euro (EUR) investors will be paying close attention to German’s factory orders report for June. The data is expected to dip slightly from 10.4% to 10.1% month-on-month.

The GBP/EUR exchange rate could sink tomorrow if the Bank of England is notably dovish in its monetary policy statement. Sterling investors will be bracing ahead of tomorrow’s important insight into the British economy’s outlook for the months ahead.

David Moore

Contact David Moore