Euro Pound Sterling (EUR/GBP) Exchange Rate Rises as German Services Show ‘Degree of Resilience’
The Euro Pound Sterling (EUR/GBP) exchange rate jumped despite subdued German activity, with the pairing trading at around £0.8590.
The single currency was left flat against the Pound as Germany’s flash PMI composite revealed that business activity remained subdued.
While the flash PMI composite edged higher for the second month in a row, the reading of 49.2 was still one of the lowest in the past six-and-a-half years.
Manufacturing remained the main weakness for the bloc’s largest economy as overall output continued to ease as factory production slowed once again.
Added to this, growth of business in the services sector was weak, with the increase of output this month the weakest since September 2016.
Commenting on this morning’s flash data, Markit’s Principal Economist, Phil Smith stated:
‘Beneath the subdued headline numbers the data show another slight convergence between the more domestically-focused service sector and export-led manufacturing.
‘While still showing a degree of resilience, the service sector is growing only modestly and at its slowest rate in over three years. By contrast, manufacturing remains firmly in contraction, but many of the indicators here are at least moving in the right direction and it would seem the worst of the downturn is over barring any shocks.’
Sterling (GBP) Slumps as Flash PMI Hits 40-Month Low
The Pound slumped on Friday after flash PMI data revealed the UK suffered its largest drop in UK private sector output since July 2016.
Thanks to Brexit uncertainty and a fresh wave of business uncertainty thanks to the upcoming UK general election, overall business activity was largely weaker in November.
The data showed the manufacturing downturn worsened, with the separate PMI measure falling from October’s 49.6 deeper into contraction to 48.3.
Meanwhile, the services PMI hit a 40-month low and slumped from stagnation to 48.6 in November, dampening Sterling sentiment.
Commenting on this, Group Director at the Chartered Institute of Procurement and Supply, Duncan Brock said:
‘With the longest stretch of weak numbers for a decade, the headline figure is a sad sight to behold. New orders fell at the fastest pace since July 2016, as domestic and overseas clients, worn-out by continuing political indecision withdrew from the marketplace, reducing overall activity in the manufacturing and services sectors.
‘With a General Election added to the Brexit mix of general uncertainty and delayed decision making, it would be a brave commentator who would suggest the possibility of any Christmas cheer as we head into the last month of the year.’
Euro Pound Outlook: Will Strong German Business Climate Buoy EUR?
Looking ahead to the start of next week, the Euro (EUR) could rise against the Pound (GBP) following the release of German business climate data.
If IFO reveals that November’s business climate has jumped to a four-month high, it could buoy single currency sentiment.
Meanwhile, the UK election will remain the main catalyst for movement of Sterling the UK approaches the 12th December.
If it is clear the Conservative Party remains ahead of Labour in opinion polls, it is likely the Euro Pound (EUR/GBP) exchange rate will be left flat.