Pound Euro (GBP/EUR) Exchange Rate Jumps as PMIs Exceed Forecasts

Pound Euro (GBP/EUR) Exchange Rate Lifts as Service Sector Expands

The Pound Euro (GBP/EUR) exchange rate has risen sharply this morning following yesterday’s slump, as the UK’s latest PMI data printed above forecasts. While manufacturing activity increased by almost 2 full points, activity in the service sector climbed unexpectedly into expansion territory.

At the time of writing, GBP/EUR €1.1509, more than 0.3% higher than today’s opening levels.

Pound (GBP) Reenergised by PMI Release

The Pound (GBP) suffered yesterday as the Autumn Statement revealed that economic growth in the UK would lag behind original estimates. Today, however, Sterling has managed to rebound as November’s PMI data impresses.

Manufacturing rose by considerably more than the expected amount, printing at 46.7 rather than the 45 forecast. While impressive, activity still remains in contraction territory, reflecting unfavourable domestic economic conditions and sluggish demand.

Meanwhile, activity in the service sector broke into expansion territory for the first time since July. Analysts at S&P Global said that service providers experienced marginal growth, commenting on a tentative revival in business services activity and resilient corporate spending.

Tim Moore, Economics Director at S&P Global Market Intelligence, said of the release: ‘The UK economy found its feet again in November as the service sector arrested a three-month sequence of decline and manufacturers began to report less severe cutbacks to production schedules.’

Looking ahead, a lack of further data today leaves GBP investors to trade on this morning’s tailwinds and any additional indications of central bank policy or economic growth. Downbeat assessments of Chancellor Jeremy Hunt’s Autumn Statement may dampen morale later in the session.

Euro (EUR) Bolstered by PMI Flash

The Euro (EUR) also benefitted this morning from the publication of November’s flash PMI data, as services and manufacturing activity in both Germany and the wider Euro area exceeded forecasts.

Services activity ticked closer to expansion in Germany and the bloc, printing at 48.7 and 48.2 respectively; yet none of the PMIs quite reached expansion territory. While manufacturing in the Eurozone hit a 6-month high, analysts struck a downbeat tone in their assessment of the data:

‘As has been the case in each month since June, companies in the eurozone reported a decline in new business,’ read the HBOC new release; ‘New export orders, including intra-euro area trade, continued to decrease rapidly.’

At lunchtime today, the European Central Bank’s (ECB) monetary policy meeting accounts will be published, potentially inspiring further movement in Euro exchange rates. While not as high as in the UK, Eurozone inflation remains persistent; traders will pay close attention to the release for details of the ECB’s cost-cutting strategy.

GBP/EUR Exchange Rate Forecast: ECB Comments to Influence Trade?

Following the release of the ECB monetary policy accounts and subsequently a scheduled speech from the central bank’s Isabel Schnabel, the Pound Euro exchange rate could take a turn in either direction.

Schnabel is considered relatively hawkish in her stance, so her comments may be construed as encouraging – which would likely boost the single currency. If EUR strengthens, GBP/EUR is likely to experience a downturn.

Into tomorrow, an improvement in the Confederation of British Industry’s (CBI) consumer confidence barometer may uplift the Pound through the Asian and early European session. In the afternoon, however, the Euro is likely to enjoy tailwinds due to an improvement in the latest Ifo business climate reading. Thus, the Pound Euro exchange rate may close the week little moved from today’s levels. 

Olivia Evershed

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