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Pound to Euro (GBP/EUR) Exchange Rate Rangebound as UK’s Services PMI Remains Downbeat in May

Euro Currency Forecast

GBP/EUR Exchange Rate Steady Despite News that UK Covid-19 Cases Could be Stabilising

The Pound to Euro (GBP/EUR) exchange rate fluctuated around €1.11 today as May’s flash UK services and manufacturing performed better-than-expected, with services – the UK’s largest sector – rising from 13.4 to 27.8.

Duncan Brock, the Group Director at the Chartered Institute of Procurement & Supply (CIPS), was downbeat in his assessment:

‘The minor easing in the downturn compared to last month’s figures only serves to highlight the depth of the fall in April’s output and does not signal that the pathway is clear for an improvement in the manufacturing and services sectors.’

‘As the sectors prepare for a further easing in restrictions and becoming covid-ready for staff to return, the danger on the horizon is a second wave of infections threatening the health of the nation and dampening consumer confidence still further.’

However, today also saw the release of the CBI Industrial Trends Survey for May fall from -56 to -62. As a result, this left many Sterling traders concerned about the health of the British economy going forward.

In more positive news, today saw the Office for National Statistics (ONS) commented that the number of people with the coronavirus in England remains stable. Consequently, this has buoyed optimism in Sterling today on a glimmer of hope that the UK’s economic situation could improve.

Euro (EUR) Steady as Eurozone’s PMI’s Fall Below Financial Crisis Levels

The Euro (EUR) failed to gain on the Pound (GBP) today despite the Eurozone’s flash IHS Markit composite PMI beating forecasts and rising from 13.6 to 30.5.

Chris Williamson, the Chief Business Economist at IHS Markit, commented on the report:

‘All eurozone countries eased their COVID-19 containment measures to some extent in May, helping to moderate the overall rate of economic decline.’

‘However, while a further loosening of restrictions is anticipated in coming months, some measures to contain the virus are likely to remain in place until an effective treatment or vaccine is found.’

However, with the Eurozone set for an extremely sharp downturn – worse than that seen in the 2008 financial crisis – the EUR/GBP exchange rate has remained subdued.

Meanwhile, Eurozone’s business confidence remains markedly low as the Covid-19 crisis threatens to plunge one of the world’s largest economies into an unprecedented recession.

GBP/EUR Outlook: Could Sterling Rise as the UK’s Covid-19 Situation Stabilises?

Euro (EUR) investors will be looking ahead to tomorrow’s release of the European Central Bank’s (ECB) monetary policy meeting accounts. However, any signs that the ECB is dovish about the Eurozone’s economy would prove EUR-negative.

Meanwhile, Pound investors will be paying close attention to the UK’s retail sales reports for April. With retail sales expected to plummet due to the nationwide lockdown, we could see Sterling stuffer.

The GBP/EUR exchange rate could edge higher, however, if the UK’s coronavirus situation continues to improve.