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Pound to Euro Exchange Rate Rises Despite Hopes for Eurozone’s Manufacturing Sector

Euro Currency Forecast

GBP/EUR Exchange Rate Edges Higher as German Manufacturing Remains in Doldrums

The Pound to Euro (GBP/EUR) exchange rate edged higher today, with the pairing up by 0.3% on today’s opening rate and currently trading around €1.11.

The Euro (EUR) struggled following today’s release of the final Eurozone’s Markit Manufacturing PMI for May, which fell below forecasts from 39.5 to 39.4. However, this was up from the record slump of 33.4 in April.

Furthermore, single currency traders are concerned for the Eurozone’s economy as Germany – the largest economy in the bloc – continues to struggle.

Chris Williamson, the Chief Business Economist at IHS Markit, provided some reasons for optimism, however:

‘The manufacturing downturn looks to have bottomed-out in April, with production falling at a markedly slower rate in May. The improvement in part merely reflects the comparison against a shockingly steep fall in April, but more encouragingly was also linked to companies restarting work as virus lockdowns were eased. The further lifting of COVID-19 restrictions in coming months should provide a further boost to manufacturers.’

Meanwhile, EUR/GBP exchange rate struggled at the start of the week as Euro (EUR) investors continued to speculate over whether the European Central Bank will expand its Pandemic Emergency Purchase Programme (PEPP).

As a result, we could see the single currency suffer as the EU continues to counter the negative economic impact of the coronavirus pandemic.

Pound (GBP) Rises as UK Eases Lockdown Measures

The Pound (GBP) edged higher today as the UK continues to ease its lockdown measures, with England’s schools beginning to reopen as well as non-essential businesses.

However, Prime Minister Boris Johnson has been criticised by Janelle de Gruchy, the President of the Association of Directors of Public Health (ADPH), who claimed that the UK government had failed to meet five tests for easing the lockdown.

The ADPH commented:

‘The critical debate is about the third test – ensuring the rate of transmission of the infection continues decreasing to manageable levels (taken to mean R being well below 1). The rapid and multiple ways in which measures are being eased is likely to make it difficult to judge the cumulative impact on R. As we saw in March, R can go above 1 in a very short space of time – and once it does it can take many months to bring it back down. The room for manoeuvre is tight.’

Nevertheless, with growing hopes for the British economy as the lockdown eases, the GBP/EUR exchange rate has started this week relatively strongly.

In UK economic data, today saw the release of the UK Markit Manufacturing PMI for May, which confirmed consensus and rose from 40.6 to 40.7.

GBP/EUR Forecast: Could Rising German Unemployment Weaken the Euro This Week?

Euro (EUR) investors will continue to pay close attention to the ECB this week. Any signs that Europe’s central bank could pump-up the Eurozone to bolster the economy would weaken the single currency.

Meanwhile, Euro investors will be looking ahead to Wednesday’s release of Germany’s employment figures for June. Any signs of soaring unemployment would also prove EUR-negative.

Nonetheless, the GBP/EUR exchange rate will remain sensitive to the UK’s coronavirus situation this week. However, if situations continue to improve – and with any further mention of easing lockdown measures – we could see Sterling continue to rise.