Pound euro (GBP/EUR) exchange rate stays flat amid pessimistic UK analysis

Pound euro (GBP/EUR) exchange rate stays flat amid pessimistic UK analysis

Article updated 16:25, 23/5/24

The pound euro (GBP/EUR) exchange rate is remaining tepid this afternoon, as analysis of the UK’s preliminary PMIs takes a more downbeat tone.

As the UK’s services PMI printed at a six-month low of 52.9, analysts have grown concerned that is may suggest slowing activity. Furthermore, markets are uncertain of how it may affect the wider UK economic outlook.

As the UK’s service sector makes up the bulk of the economy, slowing activity could be a grim sign for the wider private sector.

At the time of writing, GBP/EUR is trading at around €1.1744, showing little movement from the morning’s opening rates.

Original article continues below:

Pound euro exchange rate muddled despite robust UK PMI data

The pound euro (GBP/EUR) exchange rate is wavering this morning, despite upbeat preliminary PMIs for the UK.

At the time of writing, GBP/EUR is trading at around €1.1738, showing little movement from the morning’s opening levels.

Pound (GBP) tepid despite robust PMIs

The pound (GBP) is trading in a muted capacity this morning, following the release of the preliminary PMIs for May.

The data showed that the service sector had softened during May, but remained firmly in expansion. Additionally, the UK’s manufacturing PMI hit a 22-month high, returning to growth at 51.3, compared to a reading of 49.1 in April.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented:

‘The survey data are consistent with GDP rising by around 0.3% in the second quarter, with an encouraging revival of manufacturing accompanied by sustained, but slower, service sector growth.’

However, as the data indicated that service sector inflation was slowing, the pound was unable to capitalise on the upbeat readings.

This specific inflationary measure is paid significant attention to by the Bank of England (BoE). If it continues to cool, the BoE may be able to cut interest rates in August, a prospect which is capping Sterling.

Euro (EUR) muted amid mixed PMI data

The euro (EUR) wavered on Thursday, in the wake of mixed preliminary PMI releases.

In May, the Eurozone’s manufacturing sector improved above forecasts, while the service sector softened as expected.

However, the readings showed that the bloc’s economic recovery is continuing to gather pace. Momentum appears to be gaining in the manufacturing sector, for instance, amid improving domestic orders.

Dr Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented:

‘Encouragingly, new orders are growing at a healthy rate while the companies’ confidence is reflected by a steady hiring pace. This time, there is also some good news for the European Central Bank (ECB) as the rates of inflation for input and output prices in the services sector has softened compared to the month before.’

Elsewhere, a cautiously optimistic market mood could be undermining the common currency. Due to its safer nature, the euro may be unable to attract much support as investors seek riskier opportunities.

Pound euro exchange rate forecast: UK retail sales in focus

Looking ahead for the pound, the core catalyst of movement is likely to be the latest UK retail sales data.

Sales are forecast by economists to have fallen by 0.4% in April, down from March’s levels. This could weaken the pound by showing signs fading consumer spending. However, if the figure surprises the upside, GBP may strengthen.

Additionally, the upcoming UK election may induce some volatility in the pound. While the announcement has had little impact thus far, if rumours of a no confidence vote are accurate, GBP may fluctuate.

For the euro, data releases are few and far between as the week draws to a close. This could leave the common currency trading without a clear direction during tomorrow’s trade.

Elsewhere, risk appetite is likely to play a role in shaping the pairing. Due to the euro’s safer stature, downbeat trading conditions could raise it about the pound.

John Mulcahey

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