Pound Euro (GBP/EUR) Exchange Rate Unclear as Markets Digest Data
The Pound Euro (GBP/EUR) exchange rate has wavered sideways so far this morning as markets digest the finalised results of March’s PMI surveys.
At the time of writing, GBP/EUR is trading at €1.1397, having fluctuated in a narrow range all morning.
Euro (EUR) Struggles to Strengthen despite Upbeat Data
The Euro (EUR) initially failed to capitalise on strong economic data releases today, enjoying just a temporary uptick following Germany’s robust factory orders report.
German orders grew a whopping 4.8% in February, versus the expected growth of 0.3%. The latest data raises hopes of a recovery in the manufacturing sector of Eurozone’s largest economy and industrial powerhouse.
Later in the morning, the Eurozone’s final PMI results for March were published. Although the services PMI was revised down from 55.6 to 55, this still represents a strong expansion in service-sector activity and an improvement on February’s score of 52.7.
Furthermore, evidence of ongoing price pressures could encourage the European Central Bank (ECB) to continue raising interest rates.
Joe Hayes, Senior Economist at S&P Global Market Intelligence, commented:
‘The eurozone economy continues to bounce back from the lull we saw at the back-end of 2022 and the latest PMI survey will add fresh conviction to the view that, at least for now, the euro area is clear of a recession…
‘The case for further interest rate increases also remains strong based off the survey’s price gauges. Although inflation rates have cooled from their peaks, they continue to run in hot territory, particularly across the service sector.’
Pound (GBP) Mixed as PMI Indicates Easing Inflation
Meanwhile, the UK’s final PMI also came out this morning, with a mixed reading triggering little movement in the Pound (GBP).
The latest PMI confirmed a slowdown in service-sector activity, but the final score was slightly higher than preliminary estimates. In addition, the survey points to an ongoing recovery in the UK’s vital services industry.
Dr John Glen, Chief Economist at the Chartered Institute of Procurement and Supply (CIPS), said:
‘The biggest surge in new business for 12 months in the dominant services sector could trigger hopes that a turnaround is finally on the horizon for the UK economy. Underlined by the continuing upward trend from last month’s robust levels of overall activity and March’s strong business optimism amongst respondents also had a positive effect.’
However, the PMI also showed signs that service sector inflation was starting to stabilise, suggesting that headline consumer price inflation may begin to ease in the coming months. This could be dampening Bank of England (BoE) interest rate rise bets somewhat and thereby limiting Sterling’s upside potential.
Pound Euro Exchange Rate Forecast: USD Weakness to Lift EUR?
Looking ahead, we may see more movement in the Pound Euro pair as markets digest the PMI results and their implications for the Eurozone and UK economies, as well as the direction of monetary policy.
As the session unfolds, Russia-Ukraine news could impact EUR exchange rates. Finland’s accession to NATO yesterday caused some concern among EUR investors as Russia’s Defence Minister, Sergei Shoigu, said it increased the risks of a wider conflict. Any bellicose comments or actions from Russia today could hurt the single currency.
US data in the afternoon could also trigger movement, due to the Euro’s negative trading relationship with the US Dollar (USD). Economists expect the latest ISM non-manufacturing PMI to show a slowdown in American service-sector activity. If this dents the US Dollar, the Euro could enjoy some support.