Pound euro (GBP/EUR) exchange rate flat following mixed data
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning following the publication of the UK’s and the Eurozone’s latest PMIs.
At the time of writing, GBP/EUR is trading at around €1.1840, virtually unchanged from this morning’s opening rate.
Pound (GBP) holds steady, buoyed by retail data
The pound (GBP) is managing to stay afloat against the majority of its peers this morning despite yesterday’s dovish Bank of England (BoE) interest rate decision commentary.
Sterling is being supported by an impressive 2.9% jump in UK retail sales in June, which rose from a previous reading of -1.8% ahead of more modest expectation for a 1.5% expansion.
However, undermining the pound this morning are the UK’s preliminary PMI’s for June.
The UK’s manufacturing index beat forecasts and came in at 51.4, rising from 51.2, and exceeded a 51.3 estimate. However, the UK’s all-important services index printed below expectations, coming in at 51.2 rather than an expected reading of 53, and fell from a previous reading of 52.9.
The UK’s preliminary services index came in at a seven-month low which has ultimately capped any potential GBP gains this morning amid concerns over the pace of growth in the second quarter.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, explained:
‘Flash PMI survey data for June signal a slowing in the pace of economic growth, indicating that GDP is now growing at a sluggish quarterly rate of just over 0.1%.’
Euro (EUR) undermined by PMIs
The euro (EUR) is dipping against the majority of its peers this morning following the publication of the Eurozone’s own preliminary PMIs.
The Eurozone’s manufacturing index fell from a previous reading of 47.3 down to 45.6 in June, and missed forecasts of an increase to 47.9, remaining in contraction territory. (A score below 50).
The services index also printed below expectations, falling from 53.2 to 52.6 for this reading, again missing estimates of a rise to 53.5, however remained in expansion territory.
Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
‘Is the recovery in the manufacturing sector ending before it began? Both we and the market consensus anticipated that the increase in the index in May would be followed by another rise in June, potentially setting the stage for an upward trend. However, rather than moving closer to expansionary territory, the HCOB Flash Eurozone Manufacturing PMI reading fell, dashing hopes for a recovery.’
At the same time, ongoing French political jitters are also dragging on EUR sentiment this morning.,
Pound euro exchange rate forecast: German data to drive movement
Looking ahead, the primary driver of movement for the pound euro exchange rate at the start of next week will likely be Germany’s latest IFO business climate for June.
A marginal rise in the index on Monday could lend the single currency some modest support..
Turning to the pound, a lack of domestic data in the first half of next week will likely leave Sterling vulnerable to shifts in risk appetite.
As an increasingly risk-sensitive currency, a positive mood could buoy GBP.