Pound Euro exchange rate muted amid mixed PMI data releases

Pound Euro (GBP/EUR) exchange rate subdued following latest PMI data

The Pound Euro (GBP/EUR) exchange rate is treading water this morning as mixed PMI data is released from the UK and the Eurozone.

At the time of writing, GBP/EUR is trading at €1.1677, virtually unchanged from this morning’s opening rate.

Pound (GBP) Holds Steady on Upbeat PMIs

The Pound (GBP) is trading sideways against the majority of its peers this morning despite preliminary PMI data for the UK indicating that the UK’s recession could be ‘short lived’.

The services PMI held strong at 54.3 in February, and came in above expectations of a slight downturn to 54.1.

Manufacturing sector growth, meanwhile, remained in contraction territory, with the index printing at 47.1, up from 47 in January, but missing forecasts it would reach 47.5.

S&P Global notes that:

‘The survey data point to the economy growing at a quarterly rate of 0.2-3% in the first quarter of 2024, allaying fears that last year’s downturn will have spilled over into 2024 and suggesting that the UK’s ‘recession’ is already over’.’

As service sector inflation edges higher, accelerating growth coupled with rising prices may reduce the chances of an imminent Bank of England (BoE) interest rate cut, which in turn should support the Pound going forward.

Euro (EUR) flat on mixed Eurozone PMI

The Euro (EUR) is trapped in a narrow range this morning after the latest PMI data for the Eurozone offered a mixed economic outlook.

The service sector index surged past expectations in February and jumped from 48.4 to 50, coming in ahead of a 48.8 expectation.

This marked the end of a six-month contraction in the services sector.

On the other hand, the manufacturing PMI fell to a two-month low of 46.1 due to Red Sea shipping disruptions in January.

EUR exchange rates were left muted as the lacklustre manufacturing PMI ramped up European Central Bank (ECB) interest rate cut speculation.

HCOB Chief Economist, Dr. Cyrus de la Rubia, commented:

‘The manufacturing sector is the drag on the European economy. That is clearly demonstrated by the sharp decline in production and the drag on new orders…The latest HCOB PMI figures are likely to disappoint the ECB. Output prices have increased at a faster pace for the fourth month in a row.’

Pound Euro exchange rate forecast: ECB minutes to dent the Euro?

Looking ahead, likely to drive the Pound Euro exchange rate this afternoon are the European Central Bank’s (ECB) latest meeting minutes.

EUR investors will be eyeing the latest meeting minutes for any dovish commentary from policymakers. Should the ECB hint at potential upcoming interest rate cuts, the Euro could slide.

On Friday, Germany’s latest Ifo business climate for February is scheduled for release.The indicator is currently at the lowest level since the Covid-19 pandemic. Will an expected uptick be enough to buoy EUR exchange rates?

Turning to the Pound, an absence of market moving data may leave Sterling to be driven by market risk dynamics.

Should today’s cheery market mood extend into tomorrow, this could underpin the Pound in the latter stages of the week.

Sarah Ebrahem

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