The Pound Euro (GBP/EUR) exchange rate is wavering this morning, following the release of finalised manufacturing PMIs from both the UK and Eurozone.
At the time of writing the GBP/EUR exchange rate is trading at €1.1530. Virtually unchanged from this morning’s opening rate.
Euro (EUR) Flat amid Mixed Data
The Euro (EUR) is trading without a clear trajectory this morning following mixed data and a souring market mood.
While the Euro initially recouped some of its losses stemming from Friday’s Eurozone’s inflation data, today’s finalised manufacturing PMI data for September signals a bleak economic outlook for EUR. Coming in as expected at 43.4, just below August’s figure of 43.5, the Eurozone’s manufacturing sector remains in decline.
#Eurozone manufacturers continued to report a sharp contraction in September, the @HCOB_economics #PMI signalled (43.4), as new orders shrank at one of the fastest rates since the survey began in 1997. Read more: https://t.co/JZvQoE3Kgb pic.twitter.com/e3Mj1DJuGV
— S&P Global PMI™ (@SPGlobalPMI) October 2, 2023
This confirms the bloc’s factory sector was in contraction through the entirety of the third quarter.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, comments:
‘The Output PMI was well under 50 for the entire third quarter, so we are feeling pretty certain that the recession in manufacturing continued during this period. We probably won’t see things picking up until we ring in the new year.’
The bloc’s unemployment rate data for August was also released today, offering a more positive outlook for the Eurozone’s economy, as the figures show a continued decrease in jobless EU citizens. Dropping from July’s 6.5% to the forecast 6.4%, unemployment in the Eurozone continues to drop to record lows. This may cap the Euro’s losses, leaving trade to remain muted throughout the day.
Pound (GBP) Fluctuates amid Ongoing Economic Pessimism
The Pound (GBP) continues to wobble at the start of this week despite last week’s positive GDP uptick. Concerns of a weakening UK economy remain prominent amid a lack of notable UK data.
The UK’s finalised manufacturing PMI was released this morning and returned a marginally higher-than-forecast figure of 44.3, slightly up from August’s 39 month low of 43. Despite the minor increase, the readings are among the worst over the last 14 years as output continues to decline in the UK. This signals a continued British economic slowdown, underpinning recent concerns about the strength of the Pound.
Rob Dobson, Director at S&P Global Market Intelligence, commented:
‘September saw the manufacturing sector still mired in contraction territory, as weak conditions at home and abroad hit new order intakes and led to a further scaling back of production volumes. The cost-of-living crisis and recent rapid rise in interest rates are taking their toll, according to producers, raising the possibility of the broader UK economy slipping back into contraction during the second half of the year’.
As continued worries about the health of the UK’s economy loom, the Pound remains vulnerable to risk sentiment, while investors seem to be opting for GBP’s safer peers.
Pound Euro Exchange Rate Forecast: Bleak Data to Undermine Sterling?
Looking forward, the release of the UK’s finalised services PMIs on Wednesday may continue to underpin UK economic insecurity, and further dent GBP.
Also due out this week is the finalised European services PMI. Similarly, further signs of contraction within the Eurozone’s vital service sector could weaken EUR.
Tomorrow the European Central Bank’s (ECB) keynote speaker Philip R Lane is due to speak. Following a significant reduction to the Eurozone’s growth expectations, indication of further dovish policy may see investors’ demand for the single currency decline.
In the meantime, market mood may drive Pound Euro movements, with a cautious mood likely to undermine the increasingly risk-sensitive Pound.