Pound Euro (GBP/EUR) Exchange Rate Stumbles Following Disappointing PMI Figures

Pound Euro Exchange Rate Dips as UK PMIs Miss 

The Pound Euro (GBP/EUR) exchange rate is trading on the back foot this afternoon, in the wake of some underwhelming PMI figures from the UK. 

At the time of writing the Pound Euro exchange rate is trading at around €1.1684, down slightly from this morning’s opening rate. 

Pound (GBP) Undermined by Lacklustre PMIs 

The Pound (GBP) is trading with modest losses against the Euro (EUR) and the majority of its other peers today, as GBP investor respond to the UK’s latest PMI figures.

According to preliminary data published by IHS Markit, the UK’s manufacturing PMI slipped from 63.9 to 60.4, versus the 62.5 forecast. 

The services PMI made for even worst reading, printing at 57.8 in July, plummeting from 62.4 in June and well below expectations for a more modest decline to 62. 

The disappointing result raises concerns about the trajectory of the UK’s economic recovery at the start of the third quarter. With UK coronavirus cases on the rise, there are fears that the rebound this summer won’t be quite as strong as previously hoped. 

James Smith, developed markets economist at ING, comments: 

‘The latest UK purchasing managers indices, while still healthy, hint at an economic recovery that’s stalling as Covid-19 cases rise. We’re still expecting a positive third-quarter growth figure in the region of 1.5%, though clearly further progress towards pre-virus levels relies on prevalence falling back once more.’

Euro (EUR) Lifted by Upbeat PMIs 

Conversely, the Euro (EUR) is catching bids today as the Eurozone’s own PMI figures proved to be more upbeat than expected.

EUR investors were particularly impressed by the expansion in the services sector, with its corresponding PMI jumping from 58.3 to 60.4 this month, beating forecasts for a more modest rise to 59.5 and marking the sector’s fastest pace of expansion in 15 years. 

 Chris Williamson, Chief Business Economist at IHS Markit commented on the data: 

‘The eurozone is enjoying a summer growth spurt as the loosening of virus-fighting restrictions in July has propelled growth to the fastest for 21 years. The services sector in particular is enjoying the freedom of loosened COVID-19 containment measures and improved vaccination rates, especially in relation to hospitality, travel and tourism.’

Pound Euro Exchange Rate Forecast: Upbeat Eurozone GDP to Boost EUR? 

Looking ahead to next week’s session, a key catalyst in the Pound Euro (GBP/EUR) exchange rate looks to be the publication of the Eurozone’s latest GDP release. 

The preliminary figures for the first quarter are expected to confirm that economic growth rebounded in the second quarter, with a stronger-than-expected expansion of GDP potentially propelling the Euro higher. 

Meanwhile, the absence of any high-impact UK data, movement in the Pound may be mostly driven by domestic coronavirus developments, with a continued surge in new infections likely to pressure GBP exchange rates.