GBP/EUR Exchange Rate Steady as Eurozone Manufacturing Sector Rebounds Sharply
The Pound to Euro (GBP/EUR) exchange rate held steady today, with the pairing currently trading around €1.119.
The Euro (EUR) struggled to gain against Sterling today after the Eurozone’s final manufacturing PMI for August held steady at 51.7.
Nevertheless, fears over a resurgence of Covid-19 cases in Europe has dragged on the single currency’s gains today.
Chris Williamson, the Chief Business Economist at IHS Markit, commented on the Eurozone’s manufacturing data:
‘Eurozone factory output rose strongly again in August, providing further encouraging evidence that production will rebound sharply in the third quarter after the collapse seen at the height of the COVID19 pandemic in the second quarter. Business expectations for output in a year’s time also rose to the highest for over two years as prospects continued to brighten from the unprecedented gloom seen earlier in 2020.’
This was not enough to buoy the single currency after Germany’s unemployment rate remained unchanged 6.4%.
However, Germany’s labour office said that the number of people on short-term work schemes had dropped to 5.36 million in June from May’s 5.82 million.
In other Eurozone economic news, today will see the release of the Eurozone’s flash CPI figure for August.
If the year-on-year figure dips from 0.4% to 0.2%, then we could see the single currency struggle on fears for the bloc’s economic recovery in the months ahead.
Pound (GBP) Steady as UK Manufacturing Remains Strong in August
The Pound (GBP) held steady today despite the release of August’s UK manufacturing PMI, which undershot forecasts and dipping from 55.3 to 55.2. However, with uncertainty still facing the sector, this failed to buoy Sterling.
Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, commented on the data:
‘It seems the sector may be experiencing a ‘V’ shaped recovery with the fastest rate of growth in the manufacturing sector since May 2014. However, amidst this positivity the elephant in the room remains the poor employment figures. The drop in job numbers in August makes this feel more of a rebalancing strategy than real recovery. Companies are looking at how to stay in business for the rest of the year as challenges from the pandemic retreat a little only to be replaced by an imminent Brexit.’
Meanwhile, no-deal Brexit fears are also weighing on the Pound. This follows news that Michel Barnier, the EU’s Chief Negotiator would be heading to London today to engage in informal post-Brexit trade talks.
However, British officials have accused Michel Barnier of making it ‘unnecessarily difficult to make progress’ in Brexit talks. As a result, the GBP/EUR exchange rate is treading water today.
GBP/EUR Outlook: Could a Dovish Bank of England Drag Down Sterling?
Euro (EUR) investors will be looking ahead to tomorrow’s German retail sales report for July. Any improvement in the Eurozone’s powerhouse economy’s retail sector would prove EUR-positive.
Brexit developments will continue to drive the Pound this week. However, if informal talks between the UK and the EU show any signs of progress towards a post-Brexit trade deal, then Sterling could edge higher.
Pound (GBP) traders will also be awaiting tomorrow’s speech from Andrew Haldane, the Bank of England’s (BoE) Chief Economist. If he is notably dovish about the British economy, however, we could see the GBP/EUR exchange rate begin to fall.