GBP/EUR Exchange Rate Slips on Revised BoE Expectations
The Pound to Euro (GBP/EUR) exchange rate ticked lower this morning, as some mixed UK economic data prompted GBP investors to reassess their expectations for the next Bank of England (BoE) rate hike.
At the time of writing, the GBP/EUR exchange rate is trading at around €1.1862, virtually unchanged from this morning’s opening rate.
Pound (GBP) Stumbles as Mixed UK Data Dents BoE rate Hike Expectations
The Pound (GBP) edged lower against the Euro (EUR) in early trade today, on the back of the UK’s latest data releases.
The main source of weakness was the UK’s latest retail sales figures, which reported a shock 0.2% contraction in sales growth last month. This missed expectations for a 0.5% expansion and was the fifth consecutive month in which sales slumped.
Meanwhile, the UK’s latest PMI figures printed above expectations this month, which has helped to cap the losses in the GBP/EUR exchange rate this morning.
However, despite October’s positive figures, analysts are worries about the sustainability of growth in the services sector in the face of rising domestic coronavirus cases.
Chris Williamson, Chief Business Economist at IHS Markit, commented:
‘The UK economy picked up speed again in October, but the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases.’
These releases have in turn cast more doubt on whether BoE policymakers will be confident enough to raise interest rates when the bank meets next month.
Euro (EUR) Firms on USD Weakness
At the same time, the Euro (EUR) is trending higher this morning, as its strong negative correlation with the US Dollar (USD) sees it strengthen as the latter weakens.
This is helping to offset the publication of the Eurozone’s own PMI figures, which also indicated activity in the bloc’s service sector weakened at the start of the fourth quarter.
Chris Williamson, comments:
‘The services sector has seen some of the summer rebound fade just as resurgent virus case numbers bring renewed concerns, notably in Germany. These worries have once again hit the consumer-facing travel, tourism and recreation sectors in particular.’
While the service’s PMI disappointed, the accompanying manufacturing PMI indicated the Eurozone’s factory sector continues to see robust growth in spite face ongoing supply issues, something which appears to be lending some support to the Euro this morning.