Pound Euro (GBP/EUR) Exchange Rate Wobbles as Factory Activity Contracts
The Pound Euro (GBP/EUR) exchange rate fluctuated as this week’s session got underway as both currencies grapple with weak manufacturing data. Looking forward, GBP/EUR could continue to face mixed movement.
At the time of writing, the Pound Euro exchange rate is trading at around €1.1630, having wavered in a narrow range this morning.
UK Economic Woes In Focus for the Pound (GBP)
The Pound (GBP) is struggling for a clear direction this week, as concerns about the UK economy continue to trouble GBP investors.
The UK’s final manufacturing PMI confirmed a deeper contraction last month, pressuring the Pound, although a risk-on mood is lending Sterling some support.
As the week unfolds, UK economic data is in very short supply. The only release of note will be the final services PMI on Wednesday. If this confirms a slowdown in service sector activity, GBP exchange rates could face headwinds.
In the absence of any other data releases, GBP investors will likely turn to domestic UK headlines for fresh impetus.
More troubling news about the UK’s bleak economic outlook could drag the Pound lower. Economists are concerned that rising interest rates and stubbornly high inflation could mean the current cost-of-living crisis will get worse before it gets better, with a recession predicted by the end of year.
Any further negative headlines could hit confidence in GBP.
Euro (EUR) to Waver on mixed German Data?
In June, factory activity in the bloc contracted at its fastest pace in over three years, printing worse than preliminary estimates. This, and the Euro’s negative correlation with a rallying US Dollar (USD), are hurting EUR exchange rates today.
As the day continues, ongoing strength in USD and a risk-on market mood could apply more pressure to the Euro, which may see it start to slip against the Pound.
Looking forward, the Eurozone’s final services PMI is also out on Wednesday. This is expected to show a softer reading and a sharper slowdown than the UK PMI, so EUR may weaken against GBP.
Later in the week, mixed German data could cause volatility in the GBP/EUR pairing. An expected strong recovery in factory orders on Thursday could boost the single currency, while a decline in industrial production on Friday could trim EUR’s gains.