UK Construction Sector Nears Stagnation, GBP/EUR Exchange Rate Tumbles
The Pound Euro (GBP/EUR) exchange rate stumbled on Friday as markets reacted to a disappointing January performance within the UK’s construction sector.
Markit’s January UK construction PMI demonstrated a fall to 50.2, down from the previous period’s 52.2 and the market forecasts of a rise to 52.8.
This proved the weakest pace of expansion within the construction sector in four months, with notable contractions in house building and new orders dragging the reading down.
The Markit report stated:
‘A return to contraction in residential building activity was accompanied by near-stagnant commercial and civil engineering activity. New orders declined, linked by many companies to market uncertainty’.
On a more positive note, confidence for future growth opportunities increased, with many firms now anticipating an increase in the number of new projects later in the year.
Nonetheless, the reading still proved dangerously close to the 50-point mark that divides expansion and contraction – a cause for concern for markets and news that proved sufficient in curbing demand for the Pound.
German Coalition Talks near Endgame, EUR Exchange Rates Climb
Coalition talks in Germany are nearing the endgame, with Chancellor Angela Merkel’s Conservatives (CDU) and Martin Schulz’s Social Democrats (SPD) reportedly reaching a number of breakthroughs ahead of the Sunday deadline for negotiations.
The two parties have made progress on key elements such as the climate targets for 2030, migrant reunion laws and now aspects of education.
It should be stressed, however, that policy differences between the two parties still remain, and whilst negotiations are indeed reaching their final stages, the next hurdle will be a vote put to the SPD’s 440,000 strong cadre – an event that could take weeks.
Nonetheless, it would appear that negotiators in Berlin are desperate to find a compromise to finally bring an end to Germany’s 4-month absence of leadership.
This news drove some renewed support to the single currency, keeping the GBP/EUR exchange rate in the Euro’s favour.
Davis, Barnier to Meet Monday for Next Round of Brexit Talks, What can we Expect for the GBP/EUR Exchange Rate?
UK Brexit Secretary David Davis and the EU’s Chief Negotiator Michel Barnier are due to meet next week for the next round of Brexit talks.
The Department for Exiting the European Union has detailed the plans for this round of talks, with elements of the transition (as expected) set to take precedence.
This will materialise in Davis and Barnier meeting in London on Monday, followed by ‘technical talks’ in Brussels between Tuesday and Thursday and finally a meeting on Friday with negotiating coordinators Olly Robbins for the UK and Sabine Weyland for the EU.
Friday’s session will also conclude with an update on the UK’s future relationship, where progress – if any – will be detailed.
Whilst markets are expecting the transition phase to be less problematic than phase 1, the possibility still remains that impasses will stand – particularly regarding the EU’s call for the UK to be subject to new EU laws during the transitionary period.
Any news that points towards sufficient progress will be deemed positive for the Pound, with Sterling liable to steadily climb as uncertainty continues to diminish.
On the flip side, a lack of progress could put the GBP/EUR exchange rate under renewed pressure.
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