Euro Pound Sterling (EUR/GBP) Exchange Rate Under Pressure as Eurozone Growth Slows
July’s raft of Eurozone manufacturing and services PMIs proved rather mixed in nature, leaving the Euro to Pound Sterling (EUR/GBP) exchange rate on a weaker footing.
Investors were not impressed to find that the Eurozone composite PMI had fallen further than forecast, dipping from 54.9 to 54.3.
This was largely driven by a slowdown within the service sector, although the details of the manufacturing PMI also revealed a decline in export orders.
All in all, this did not paint the most encouraging picture of the domestic outlook, as Chris Williamson, Chief Business Economist at IHS Markit, commented:
‘The renewed slowdown comes as a disappointment, confirming suspicions that June’s rebound was temporary, largely due to businesses in some countries making up for an unusually high number of public holidays in May.
‘Given the waning growth of new business and further slide in business optimism, the outlook has also deteriorated, notably in manufacturing, where the surveys saw worries about trade wars intensify markedly in July.’
As a result, the Euro (EUR) fell out of favour once again, given that global trade tensions are unlikely to ease any time soon.
BoE Comments Fail to Boost Odds of August Interest Rate Hike
Comments from Bank of England (BoE) deputy governor Ben Broadbent failed to put significant pressure on the Euro to Pound Sterling (EUR/GBP) exchange rate, meanwhile.
As Broadbent indicated that he is not yet sure whether he will vote in favour of an August interest rate hike the appeal of Pound Sterling (GBP) diminished.
Given that the odds of an imminent rate hike have fallen significantly over the course of the last week the upside potential of GBP exchange rates has looked limited.
However, the Pound found some support on Tuesday morning thanks to a slight improvement in the CBI business optimism index, which picked up from -4 to -3 in the third quarter.
This suggests that businesses are seeing some cause for confidence, in spite of the lingering uncertainties surrounding Brexit and the UK’s future trade relationship with the EU.
Euro Pound Sterling (EUR/GBP) Exchange Rate Set For Volatility on ECB Meeting
The Euro to Pound Sterling (EUR/GBP) exchange rate could find a solid rallying point in the wake of Thursday’s European Central Bank (ECB) policy meeting.
Investors are keen to assess the current policy outlook of the ECB, with speculation still rife over the likely timing of the central bank’s first interest rate hike in years.
If President Mario Draghi appears in a more hawkish mood this could give the Euro a solid boost across the board, encouraging hopes that further monetary tightening will come sooner rather than later.
However, if policymakers appear more cautious in outlook this is likely to weigh heavily on the single currency.
Any fresh intensification in trade tensions between the US and EU may also drag the Euro to Pound Sterling (EUR/GBP) exchange rate lower.
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