Lower UK Construction PMI could Trigger GBP/EUR Exchange Rate Losses
Pound Sterling (GBP) has fallen by -0.6% against the Euro (EUR) today, trading at a level of €1.1102.
This deterioration follows the news that August’s UK manufacturing PMI has declined by more than expected, revealing apparent sector weakness.
Looking ahead, the Pound could make greater losses against the Euro on Tuesday when UK construction PMI data comes out.
Current estimates are for construction sector activity to have slowed in August; analysts are forecasting a shift from 55.8 points to 55 for the reading.
Reduced growth in the construction sector could lower GBP demand, as in the long-term it could mean increased pressure on the UK housing supply.
If the construction PMI beats forecasts and shows a smaller-than-expected slowdown or even growth then the Pound could reverse recent losses and rise against the Euro.
Key UK Services PMI Reading could Trigger GBP/EUR Exchange Rate Rally
Beyond Tuesday’s UK construction sector PMI, Pound Sterling (GBP) could also be affected by Wednesday morning’s services PMI reading.
This is expected to show sector growth during August, with a shift from 53.5 points to 53.9. While only a small rise, such a result could still boost GBP demand.
The UK services sector is the single largest contributor to national economic growth, so any signs of expansion bode well for future GDP readings.
The services sector covers a wide range of industries such as tourism and financial services, in additional to factoring in retail sales.
In essence, a forecast-matching or beating services sector reading could be enough to cause a sharp Pound to Euro exchange rate rise in the middle of the week.
Euro to Pound Outlook: Will Rising Eurozone PMIs Push EUR/GBP Exchange Rate Higher?
Eurozone PMI readings are also out this week. The first set has come this morning, showing that manufacturing sector activity slowed in August.
While this has been a bad start to the week for Euro (EUR) traders, the single currency could still rise further against the Pound (GBP) when Wednesday’s PMI stats come out.
These will consist of finalised readings for August, made up of a services sector reading and an overall composite figure as well.
Both PMI figures are predicted to rise slightly, which could be enough to cause a EUR/GBP exchange rate rise.
Forecast for Eurozone GDP Slowdown could Trigger EUR/GBP Exchange Rate Losses This Week
Further ahead, the Euro (EUR) is at risk of declining against the Pound (GBP) this week when Eurozone GDP figures come out on Thursday.
These will consist of third estimates for GDP growth in Q2 2018 and economists predict a year-on-year slowdown from 2.5% to 2.2%.
While this would still leave the single currency bloc with a healthy pace of economic growth, it could be seen as a step back and trigger losses against Pound Sterling.