Pound euro (GBP/EUR) exchange rate climbs higher as UK PMIs beat forecasts
The pound euro (GBP/EUR) exchange rate is gaining ground this morning following the latest batch of preliminary PMIs in both the Eurozone and the UK.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1770, up approximately 0.3% from this morning’s opening rate.
Pound (GBP) bolstered by PMIs
The pound (GBP) is trending broadly higher this morning following a better-than-forecast set of preliminary PMIs in the UK
S&P Global reported in its latest release that the UK manufacturing sector expanded at its fastest pace in two years, with the index rising to 52.5 in August’s estimates, surpassing market projections of 52.1.
Meanwhile, services activity rose from 52.5 to 53.3 this month, above market expectations of 52.8.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that the data supports hopes that the UK economy continues to grow in 2024, commenting:
‘August is witnessing a welcome combination of stronger economic growth, improved job creation and lower inflation, according to provisional PMI survey data.
Both manufacturing and service sectors are reporting solid output growth and increased job gains as business confidence remains elevated by historical standards.’
Elsewhere, an improving market sentiment underpins the increasingly risk-sensitive pound against its safer rivals.
Euro (EUR) undermined by manufacturing weakness
The euro (EUR) is largely subdued this morning despite news of better-than-expected services growth across the Eurozone.
The release of the bloc’s latest PMIs revealed a larger-than-forecast acceleration within the vital services sector, as the index rose to 53.3 in August’s preliminary estimates, notably surpassing market expectations of a second successive reading of 51.9.
However, manufacturing activity continues to slump this month, with the index printing firmly in contraction territory at 45.6 and hitting an eight-month low.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, explained that the bloc’s services uptick may be short lived, noting:
‘The boost largely comes from a surge in services activity in France, with the Business Activity Index jumping by almost five points, likely linked to the buzz surrounding the Olympic Games in Paris.
It’s a tale of two worlds. The manufacturing sector remains mired in recession, while the services sector still appears to be growing at a decent clip’
Additionally, a recovering US dollar (USD) applies further pressure to the single currency, due to the pairing’s negative trading relationship.
Pound euro exchange rate forecast: BoE speech in focus
Looking ahead, the hotly awaited Jackson Hole Symposium kicks off tonight. The Federal Reserve’s annual conference, in which monetary policy is discussed at length, will host keynote speeches from various central bank policymakers. With Fed Chair Powell due to speak on Friday, any further dovish signals from the senior rate-setter may see USD tumble amid solidified expectation of a September interest rate cut.
In turn, EUR could climb higher as USD weakens, due to the pairing’s negative correlation.
Bank of England (BoE) Chief Economist Andrew Bailey is also due to speak at the looming conference. Bailey’s words will likely be placed under close scrutiny by GBP investors, as markets search for any hints towards the BoE’s forward path.