GBP/EUR Exchange Rate as German Manufacturing PMI Sinks Below Forecast
The Pound Euro (GBP/EUR) exchange rate held steady this morning, fluctuating around €1.106 after the publication of the German Markit Manufacturing PMI for August, which fell deeper into contraction territory from 43.6 to 43.5.
Phil Smith, the Principal Economics Director at IHS Markit, commented:
‘Germany’s manufacturing PMI held close to a seven-year low in August as new orders continued to fall sharply and the production of goods was scaled back once again. Furthermore, a marked drop in firms’ output expectations to a record low suggests that things could even get worse before they get better.’
Meanwhile, the Spanish Markit Manufacturing PMI for August, which beat forecasts and rose from 48.2 to 48.8.
However, as the gauge still remained mired in contraction territory, this failed to provide any uplift for the European currency.
GBP/EUR Exchange Rate Flat, UK Political Developments Remain in Focus
Sterling traders are remaining cautious ahead to the publication of August’s UK Markit Manufacturing PMI, which is expected to remain in contraction territory at 48.4.
However, UK political developments remain in focus this week following Prime Minister Boris Johnson’s announcement of the prorogation of Parliament from mid-September to October last week.
As a result, a cross-party alliance, which includes rebel Tories, are mounting in opposition to both a no-deal Brexit and the suspension of the House of Commons.
Following Boris Johnson’s threat to withdraw the whip from numerous Conservative MPs if they attempt to prevent a no-deal Brexit, tensions have escalated within the party.
Philip Hammond, former Chancellor of the Exchequer, rejected a one-on-meeting with the Tory leader, saying:
‘There has been very little attempt at engagement with us, but these people were going in seeking proof of genuine attempts to get a Brexit deal. The fact it had been cancelled at short notice suggests there isn’t a proper negotiation going on. The next point of engagement will be in the voting lobbies.’
GBP/EUR Outlook: Sterling Could Rise if Boris Johnson’s Parliamentary Suspension in Challenged
Sterling traders will be looking ahead to tomorrow’s release of the UK BRC Like-For-Like Retail Sales for August. Any signs of improvement could bolster market confidence in the Pound.
Tomorrow will also see the European Central Bank’s new President, Christine Lagarde, give a speech to the Committee on Economic and Monetary Affairs (ECON).
Euro traders will be paying close attention to any indications of a dovish outlook for the Eurozone’s economy.
The GBP/EUR exchange rate is likely to remain dominated by UK political developments over the course of the week. If Boris Johnson’s suspension of Parliament is successfully challenged, we could see the Pound begin to rise as a no-deal Brexit will become less likely as rebel MPs gain back control.
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