Pound Euro Exchange Rate Steady as Vaccine Progress Boosts Confidence in Eurozone Economy

GBP/EUR Exchange Rate Rangebound as Eurozone Services Sector Posts Strongest Growth Since 2018

The Pound Euro exchange rate held steady today following the publication of the latest Eurozone Markit PMI composite figure for May, which beat forecasts and rose from 56.9 to 57.1. The pairing is currently fluctuating around €1.16.

The Euro (EUR) failed to rise against the Pound today, however, despite the improving outlook for the Eurozone economy.

Chris Williamson, the chief business economist at IHS Markit, commented on the latest PMI statistic:

‘The Eurozone’s vast service sector sprang back into life in May, commencing a solid recovery that looks likely to be sustained throughout the summer.

‘Businesses reported the strongest surge in demand since the start of 2018 as Covid restrictions were eased and vaccine progress boosted confidence.’

Improving global risk sentiment has however limited the appeal of the safe-haven single currency today.

However, with lockdown restrictions easing across Europe, we could see the EUR/GBP exchange rate head higher if confidence continues to grow in the Eurozone economy.

Pound Exchange Rate Steady as UK Services Sector Posts Strongest Rise in Activity for Quarter-Century

The Pound failed to make significant ground against the Euro today following the publication of the latest UK services PMI figure for May.

The data revealed a stronger-than-expected growth in the nation’s largest sector, with the figure rising from 61.8 to 62.9.

Tim Moore, the economics director at HIS Markit, which compiles the PMI survey, commented on the data:

‘UK service providers reported the strongest rise in activity for nearly a quarter-century during May as the roll back of pandemic restrictions unleashed pent up business and consumer spending. The latest survey results set the scene for an eye-popping rate of UK GDP growth in the second quarter of 2021, led by the reopening of customer-facing parts of the economy after winter lockdowns.’

Today will see a speech from the Bank of England’s (BoE) Governor Andrew Bailey.

Any upbeat comments about the outlook for the UK economy would see the GBP/EUR exchange rate edge higher.

Pound Euro Exchange Rate Forecast: Could a Delay to Easing Lockdown Measures in the UK Limit Sterling?

Tomorrow will see the release of the latest UK construction PMI for May.

If this confirms forecasts and rise to 62.3, then we would see the GBP/EUR exchange rate head higher.

Euro (EUR) investors will be eyeing tomorrow’s publication of the Eurozone’s retail sales data for April.

Any further improvement in the outlook for the Eurozone economy would see a pick-up in the EUR/GBP exchange rate.

GBP traders will continue to monitor the UK Government’s stance on the planned easing of lockdown measures on June 21.

Any indications that the Government could potentially delay the easing of restrictions would be GBP-negative.

David Moore

Contact David Moore