Widened UK Budget Deficit Fails to Shore up Euro Pound Sterling (EUR/GBP) Exchange Rate
A sharp widening of the UK budget deficit failed to offer the Euro to Pound Sterling (EUR/GBP) exchange rate a rallying point on Thursday.
Even though the deficit widened further than forecast, swelling from -8.5 billion to -10.5 billion in October, Pound Sterling (GBP) still found support.
With this uptick in public sector net borrowing unlikely to deter the political parties from their election spending pledges the ultimate impact of the data was limited.
As at least some of the increase in borrowing was likely due to preparations ahead of the former Brexit deadline investors saw limited cause for concern in the wake of the report.
Anticipation ahead of the release of the European Central Bank’s (ECB) set of October meeting minutes kept the Euro (EUR) on a softer footing, meanwhile.
With markets wary of the potential for fresh dovish signals from the central bank support for the single currency proved largely muted.
Pound Sterling Looks for Boost on November’s UK Services PMI
The mood towards the Pound could improve further ahead of the weekend if the latest UK services PMI improves as forecast.
Investors expect to see the PMI pick up from 50.0 to 50.2 in November, lifting the sector out of a state of stagnation.
Although this would only represent a limited degree of growth on the month any evidence of strengthening within the service sector looks set to lift GBP exchange rates.
As the service sector remains the primary growth engine of the UK economy the Pound could see strong gains in the wake of a positive PMI reading.
While forecasts point towards another month in contraction territory for the accompanying manufacturing PMI this may not offer the EUR/GBP exchange rate any boost.
With the manufacturing sector only accounting for a limited fraction of UK economic activity, and thus the gross domestic product, any fresh weakness could easily be overshadowed by the services PMI.
Underwhelming Eurozone Manufacturing PMIs Forecast to Weigh on Euro
Confidence in the outlook of the Eurozone economy could take a fresh blow on Friday if November’s raft of manufacturing and services PMIs fail to impress.
While markets expect to see a modest improvement from the German manufacturing PMI the index still looks set to remain trapped in contraction territory.
Unless the German manufacturing sector shows signs of bouncing back from its prolonged decline worries over the health of the Eurozone’s powerhouse economy are likely to persist.
Even so, a stronger showing from the corresponding services PMI could help to offset the negative impact of another month of deterioration in manufacturing activity.
As long as the Eurozone economy appears at risk of losing fresh momentum in the fourth quarter, though, the EUR/GBP exchange rate may struggle to find any particular traction.
Without the support of a resilient set of PMIs the Euro appears set to remain on the back foot in the near term.