GBP/EUR Exchange Rate Extends Losses as Vaccine Worries Weaken Pound

Pound Euro (GBP/EURExchange Rate Weakened by Vaccine Concerns  

The Pound (GBP) remained on the back foot on Wednesday in spite of confirmation that the UK services PMI had returned to expansion territory in March.  

The UK’s services PMI came in at 56.3, less than the 56.8 forecast but up considerably from the previous reading of 49.5.  

Although the return to growth in the service sector is a positive sign for the UK, the Pound extended losses against the Euro and US Dollar. The Pound Euro (GBP/EUR) exchange rate is currently down almost 2 cents from the levels seen at the start of the week.  

Some of the pressure on GBP exchange rates came from doubts over the AstraZeneca vaccine after UK drugs regulators recommended offering an alternative vaccine to under 30s.  

Today’s UK construction PMI is expected to show improvement, but as the construction sector accounts for less than 10% of total output the report is unlikely to give the Pound a boost.  

Euro (EUR) Bolstered by Eurozone Services PMI 

Yesterday’s finalised Eurozone services PMIs boosted Euro exchange rates, with the gauges for Germany and the Eurozone as a whole proving stronger than expected.  

While the Eurozone’s measure remained just below the 50 mark separating growth from contraction, it rose from 45.7 to 49.6.  

This morning’s construction PMI for the Eurozone showed a return to growth, marking the first rise in activity since February 2020.  

Today’s European Central Bank (ECB) monetary policy meeting account may inspire some EUR movement as it’s expected to give an insight into policymakers’ decision to increase the pace of the asset purchase programme. 

Fed Reiterates that Policy will Remain Easy  

The Federal Open Market Committee (FOMC) meeting minutes – published yesterday evening – confirmed that it will be some time before conditions are appropriate to scale back monetary policy support, including reducing asset purchases. 

President Biden, meanwhile, delivered a speech on infrastructure in which he suggested increasing investment is a matter of national security.  

The US Dollar is currently trending higher against the Pound but lower against the Euro.   

Today’s US initial jobless claims report is expected to show a slight decline in applications for unemployment benefits.  

Canadian Dollar (CAD) Softens in Spite of Surging PMI  

The Canadian Dollar (CAD) failed to capitalise on an unexpectedly strong uptick in the Ivey PMI as a risk-off mood permeated markets.  

The Ivey PMI jumped from 60 to 72.9, taking it far above the 50 mark separating growth from contraction.  

However, a separate Canadian report showed a narrowing in the national trade surplus, with exports down 2.7%.  

While there are no Canadian releases to look out for today, tomorrow’s employment figures could trigger CAD movement before the weekend.  

Australian Dollar (AUD) Struggles amid Risk Aversion  

The Australian Dollar (AUD) stumbled as the finalised services PMI showed a smaller monthly uptick than anticipated, although the service sector demonstrated solid growth in March. 

While signs point towards the Australian economy remaining on a stronger footing in the first quarter, AUD exchange rates were left on the back foot in the face of wider risk aversion.  

The next Australian data release to look out for is today’s AI Group Services Index. An improvement on the previous reading could lend the ‘Aussie’ some support.  

New Zealand Dollar (NZD) Fluctuates after Business Confidence Data  

The New Zealand Dollar put on a mixed performance following the release of New Zealand’s latest Business Confidence index.  

The gauge showed a decline in sentiment, slipping from -4.1to -8.4.  

With no further New Zealand releases due out before the weekend any further NZD volatility is likely to be the result of general risk appetite.  

Josh Jeffery

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