Pound euro (GBP/EUR) exchange rate muted despite risk-on flows
(Updated 16:00, 02/05/24)
The pound euro (GBP/EUR) exchange rate has continued to trade mostly flat as the session has progressed into the afternoon amid a further lack of macroeconomic data releases.
Despite a cautiously upbeat market mood, the currency paining has struggled to strengthen despite the pound’s (GBP) increasingly risk-sensitive nature.
The euro (EUR) however is softening against the majority of its counterparts thanks to its status as a safe haven currency.
At the time of writing, GBP/EUR is trading at around €1.1686, virtually unchanged from this morning’s opening rate.
Original article continues below:
Pound euro (GBP/EUR) exchange rate muted following underwhelming Eurozone PMI
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning following the release of the Eurozone’s latest manufacturing PMI.
At the time of writing, GBP/EUR is trading at around €1.1690, showing little movement from this morning’s opening levels.
Euro (EUR) undermined by manufacturing PMI
The euro (EUR) is on the defensive against the majority of its peers this morning following the publication of the Eurozone’s latest manufacturing PMI.
Although April’s finalised figure came in marginally above the preliminary estimate, printing at 45.7 rather than 45.6, the data still reported the contraction in Eurozone factory activity deepened to a four-month low.
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
‘What is going to rescue the Eurozone economy? While this is a difficult question, one thing is clear: It’s not the manufacturing sector. Instead, this sector is prolonging its drawn out recession into April. Output shrank at a similar pace as in the months before and companies have reduced their purchases at an accelerated rate.’
Pound (GBP) pressured by growth forecasts
The pound (GBP) is dipping against the majority of its peers this morning, hobbled by the latest UK economic forecasts from the Organisation for Economic Co-operation and Development (OECD).
The OCED has slashed its UK growth forecast for 2024 to 0.4%, down from a previous estimate of 0.7% in from February.
The organisation also cut its 2025 growth forecast, predicting the UK will the slowest growing G7 country with a 1% expansion.
The OCED cited stubbornly high interest rates as the primary driver for its change in growth projections, and explained:
‘GDP growth is projected to remain sluggish [in the face of a] waning drag from past monetary tightening.’
Analysts suggest the downgrade to growth may place more pressure on the Bank of England (BoE) to start cutting interest rates.
Pound euro exchange rate forecast: Eurozone employment in the spotlight?
Looking ahead, the primary driver of movement for the pound euro exchange rate for the remainder of the week is likely to be the Eurozone’s latest unemployment reading, scheduled for release tomorrow.
March’s data is forecast to have stayed near record lows, expected to remain at 6.5% for this reading.
Should the data match expectations and confirm a robust employment sector, this could give the European Central Bank (ECB) motivation to keep interest rates higher for longer, which may be able to offer some support to EUR exchange rates at the end of this week.
Turning to the Pound, the only UK data release of note this week will come in the form of the UK’s finalised services PMI data, also scheduled for release tomorrow.
April’s preliminary figures are forecast to show that the UK’s vital services sector increased to an 11-month high.
Should the data print as expected and report further growth in the UK’s services sector, the pound could close the week firming against its peers.