Pound euro exchange rate remains near three-month low

Pound euro (GBP/EUR) firms following hawkish BoE commentary

(Updated 16:30, 23/04/24) The pound euro (GBP/EUR) exchange rate has managed to edge higher moving into this afternoon’s European session; however, the currency pairing remains trading near a three-month low.

Potentially supporting the pound this afternoon are some hawkish comments from Bank of England (BoE) Chief Economist Huw Pill.

Pill said:

‘In my view, against the background of a welcome decline in headline inflation, the outlook for UK monetary policy in the coming quarters has not changed substantially since the beginning of March.’

Pill’s remarks served to lift Sterling sentiment amid hints that the central bank may still be far away from loosening its monetary policy.

The euro has remained fluctuating against the majority of its peers this afternoon amid a lack of any further macroeconomic data.

At the time of writing, GBP/EUR traded at around €1.1627, up roughly 0.3% from this morning’s opening rate.

Original article continues below:

Pound euro (GBP/EUR) exchange rate muted following PMIs

The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning following the release of both the UK’s and Eurozone’s latest PMI data.

At the time of writing, GBP/EUR traded at around €1.1574, virtually unchanged from this morning’s opening rate.

Pound (GBP) underpinned by Services PMI

While flat against the euro (EUR), the pound (GBP) is trending higher against the majority of its other peers this morning following the release of the UK’s latest PMIs..

The data printed somewhat mixed, however overall, the index confirmed that UK businesses expanded at their fastest pace in an 11-month span.

The gain was led by a better-than-expected services index, rising from 53.1 to 54.9 beating market expectations of a more modest reading of 53.

Elsewhere, the manufacturing sector printed below expectations and fell from 50.3 to 48.7, plunging the sector back in contraction territory (printing under the 50 level that marks expansion).

The strong uptick in services sector growth is underpinning, Sterling this morning amid the UK improving economic outlook.

Chris Williamson, chief business economist at S&P Global Market Intelligence, comments:

‘Early PMI survey data for April indicate that the UK economy’s recovery from recession last year continued to gain momentum. Improved growth in the service sector offset a renewed downturn in manufacturing to propel overall business growth to the fastest for nearly a year, indicating that GDP is rising at a quarterly rate of 0.4% after a 0.3% gain in the first quarter.’

The PMIs also highlighted rising price pressures within the private sector, with Sterling also benefitting from suggestions that inflation may be stickier than currency expected by the Bank of England (BoE).

Euro (EUR) mixed following Eurozone PMI data

The euro is fluctuating this morning, rangebound against the majority of its peers however is managing to rise against its risk-sensitive counterparts, following the release of the Eurozone’s latest PMI data.

Similarly to the UK’s reading, April’s data also varied from expectations, and showed a strengthening services sector and a weakening manufacturing sector.

The preliminary services PMI came in above forecast at 52.9, rising from a previous reading of 51.5 and beat expectations of a more modest figure of 51.8.

However, the manufacturing sector dropped from 46.1 to 45.6 for this reading, below predictions of a 46.6 reading.

Cyrus De La Rubia, Chief Economist at Hamburg Commercial Bank commented:

‘The Eurozone got off to a good start in the second quarter. The Composite HCOB Flash PMI took a significant step into expansionary territory. This was propelled by the services sector, where activity has gathered further steam.’

However, despite the significant increase in the Eurozone’s services sector, the single currency is struggling to catch bids this morning.

Pound euro exchange rate forecast: German data to drive movement?

Looking ahead, the primary catalyst of movement for the pound euro exchange rate in the second half of this week is likely to be a number of German macroeconomic data releases.

On Wednesday, Germany’s IFO business climate is expected to show a slight uptick in April’s figures, which could bolster EUR exchange rates in mid-week trade.

On Thursday, business confidence in the Eurozone’s largest economy is forecast to show another dip for May’s reading which could serve to undermine the common currency towards the end of the week.

Turning to the pound, a lack of notable UK data releases may leave GBP exchange rates struggling to find a clear trajectory through the remainder of the week.

Sarah Ebrahem

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