UK Construction PMI Surge Fails to Shore up Pound Euro Exchange Rate
A surge in the UK construction PMI was not enough to keep the Pound to Euro (GBP/EUR) exchange rate from trending lower once again.
While the index jumped from 53.5 to 61.7 on the month, hitting a six-year high, this failed to give Pound Sterling (GBP) any boost against its rivals.
As the construction sector remains only a limited contributor to the UK gross domestic product this strong uptick is unlikely to significantly alter the quarterly growth rate.
Even though signs point towards the economy having recovered some of its lost momentum at the end of the first quarter demand for the Pound remained limited.
With profit taking still weighing on GBP exchange rates, in spite of growing hopes of a return to positive growth, there appeared little room for an uptrend.
Stagnant Eurozone Construction Sector Limits Euro Appeal
Even so, the Euro (EUR) struggled to capitalise on its rival’s weakness thanks to another underwhelming set of Eurozone construction PMIs.
As the Eurozone construction sector remained stagnant in March this cast fresh doubt over the strength of the economic outlook, leaving EUR exchange rates under a degree of pressure.
A surprise downward revision to January’s German factory orders data also limited the appeal of the single currency.
The lingering threat of additional social restrictions coming into place across the currency union left EUR exchange rates on a generally softer footing over the course of the day.
Euro Exchange Rates Look for Boost on Widened German Trade Surplus
However, the mood towards the Euro could well improve ahead of the weekend thanks to the release of the latest German trade data.
Forecasts point towards the headline trade surplus widening once again, swelling from €14.3 billion to €21.5 billion on the month.
Such an improvement would suggest that the Eurozone’s powerhouse economy had returned to a stronger footing in February, recovering some of its lost trade momentum.
If the accompanying industrial production figure also shows a solid increase on the month this could see the Pound to Euro exchange rate extending its downtrend further.
Signs of UK Economic Optimism Set to Limit GBP Exchange Rate Downside
While markets remain optimistic ahead of the anticipated reopening of non-essential UK retail next week this may not be enough to give the Pound any particular boost.
With the impact of a retail sector recovery already largely priced into GBP exchange rates this limits the ability for the currency to find any fresh support on the development.
However, if the Bank of England’s (BoE) quarterly bulletin proves less dovish in nature this may offer the Pound a leg up against its rivals.
Evidence that the central bank continues to take a more positive view of the economic outlook could give the Pound to Euro exchange rate room to recover on Friday.