Pound Euro (GBP/EUR) Exchange Rate Buoyed following PMI Surveys.
The Pound Euro (GBP/EUR) exchange rate has drifted higher this morning amid the release of both the Eurozone’s and the UK’s flash PMI.
At the time of writing the GBP/EUR exchange rate is trading at $1.1540, up approximately 0.2% from this morning’s opening rate.
Euro (EUR) Dented following Poor PMI
The Euro (EUR) has slumped this morning after the release of the Eurozone’s preliminary PMIs.
October’s surveys for the bloc reported disappointing figures, showing a deepening contraction in Eurozone business activity. Both the manufacturing and services PMIs deteriorated, printed below expectations. with the composite figure returning its lowest figures since November 2020.
As business activity in the Eurozone remains weak, European Central Bank (ECB) interest rate hike bets appear to have been dampened. In turn the common currency faces selling pressures today amid economic concerns within the Euro area.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented:
‘In the euro zone, things are moving from bad to worse. We wouldn’t be caught off guard to see a mild recession in the euro zone in the second half of this year with two back-to-back quarters of negative growth.’
Pound (GBP) Muted amid Lacklustre UK Data
The Pound (GBP) has firmed against the Euro this morning despite the UK’s latest PMI and jobs data coming in weak.
September’s adjusted unemployment rate for August came in at 4.2%, a slight upward revision from the 4% provided last week. With a gradual rise in unemployment over the last three months, the UK’s labour market looks to be slowing, fuelling concerns that the UK’s economy is struggling to stay afloat.
Also released this morning, the UK’s latest PMIs for October were in contraction territory for another month, pointing towards a continued slowdown in UK economic activity.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
‘Gloom about the outlook has intensified in the uncertain economic climate, boding ill for output in the coming months. A recession, albeit only mild at present, cannot be ruled out.’
As the UK edges towards a potential recession, investors speculate that another rate hold is likely from the Bank of England (BoE) next week. Amid a lack of UK economic confidence and declining rate hike bets, the Pound continues to stumble.
Pound Euro Exchange Rate Forecast: ECB Speech to Dent the Euro?
Looking ahead, ECB President, Christine Lagarde, is due to speak later today. While recent commentary from ECB officials has been mixed, any indication from Lagarde of tightening monetary policy in the Eurozone could bolster the Euro.
Alternatively, if Lagarde strikes a dovish tone, investors may rethink rate hike bets ahead of the central bank’s looming interest rate decision. Following today’s disappointing PMI data, ECB rate hike bets could remain limited amid concerns of a slowing Eurozone economy.
Amid a lack of fresh UK data, the Pound may be susceptible to risk sentiment in the coming days. As geopolitical tensions rise investor confidence in riskier currencies may continue to decline. Cautious trade may see the increasingly risk-sensitive Pound stumble.