Pound euro (GBP/EUR) exchange rate remains flat amid downbeat manufacturing data
Article updated 16:20, 1/5/2024:
The pound euro (GBP/EUR) exchange rate is remaining flat this afternoon, amid a lack of further data catalysts.
As such, the pound has been unable to gain ground over the euro. Furthermore, the market mood is remaining mixed-at-best, as markets anticipate the latest interest rate decision from the Federal Reserve.
Due to the euro’s negative correlation with the US dollar, any hawkish remarks this evening could weigh heavily on EUR exchange rates.
At the time of writing, GBP/EUR is trading at around €1.1694, showing little movement from the morning’s opening rates.
Original article continues below:
Pound euro (GBP/EUR) exchange rate static amid downbeat UK manufacturing data
The pound euro (GBP/EUR) exchange rate is rangebound this morning, following confirmation of contraction in the UK manufacturing sector.
At the time of writing, GBP/EUR is trading at around €1.1714, showing little movement from the morning’s opening rates.
Pound (GBP) wavers amid confirmation of manufacturing slowdown
The pound (GBP) is trading within narrow boundaries this morning, following confirmation of a contraction in the UK’s manufacturing sector.
The final reading of April’s manufacturing PMI was revised upward compared to the preliminary reading. Although the data was less downbeat than first anticipated, it confirmed a contraction in the sector.
Rob Dobson, Director at S&P Global Market Intelligence, commented:
‘The downturn is also sustaining cost caution at manufacturers, leading to lower employment, stock holdings and cutbacks in purchasing activity. The news on the prices front is also worrisome for those looking for a sustainable path back to target (consumer price) inflation.’
As the analysis is revealing slowing employment, but sticky inflationary pressures, the pound is left adrift.
While persistent inflation may give the Bank of England (BoE) more room to keep interest rates elevated, cooling labour could increase the likelihood of an imminent cut to aid the economy.
Sterling is also being left exposed to a downbeat market mood due to a lack of other data. As an increasingly risk-sensitive currency, GBP is struggling to attract support as investors favour safer assets.
Euro (EUR) treads water amid market closures
The euro (EUR) is wavering today, due to market closures in observance of Labour Day. As this is likely to prompt thin trading conditions over the day’s session, the euro is unlikely to gain much ground.
Because of this, the common currency is likely to be driven today by impactful data from US markets.
Today, the latest US ISM manufacturing PMI and JOLTs job openings data are due for publication. If these data sets print as forecast and show softening activity and hiring, the euro could strengthen a touch.
However, due to the aforementioned market closures, the euro is unlikely to gain a full advantage against its peers.
Pound euro exchange rate forecast: EU unemployment rate in focus
Looking ahead for the euro, the core catalyst of movement is likely to be the latest unemployment rate. This is due to print on Friday, as reflects unemployment during March.
Markets anticipate this reading to have held near record lows, remaining at 6.5%. This could prompt EUR to strengthen as it would likely indicate robust employment. This, in turn, could give the European Central Bank (ECB) room to keep interest rates elevated, further lifting the euro.
For the pound, meanwhile, impactful data is few and far between. This may shift focus towards the final service sector PMI for April. If this confirms an expansion in the sector on Friday, GBP exchange rates could enjoy a tailwind.
Elsewhere, risk appetite is likely to play a role in shaping GBP/EUR’s trajectory. As the pound is more risk-sensitive, bullish trade could see it strengthen above EUR.