The Pound (GBP) exchange rate recovered some ground to trade in a mixed range against the Euro (EUR) and several other peers on Tuesday after the latest Construction Purchasing Managers Index (PMI) came in below economist expectations.
According to the PMI compiled by Markit/CIPS, the UK’s construction sector expanded at its weakest rate in five months in October as a cooling housing market reduced the number of new homes being constructed. Turning weather conditions also slowed activity.
The construction PMI fell to a figure of 61.4 in October from September’s reading of 64.2. The decline was steeper than the 63.5 number forecast by economists.
In a PMI, any figure above 50 indicates expansion whilst a number below indicates contraction. The index has held above the 50 level for the past year and a half and marks the sectors best run since the financial crisis.
‘October’s survey provides the first indication that the chill winds blowing across the UK housing market have started to weigh on the booming residential sector. Despite signs that the house building recovery has lost some intensity, UK construction companies remain highly upbeat about their overall prospects for growth,’ said senior economist at Markit Tim Moore.
The losses against the Euro are forecast to be short-lived as the data shows that the sector remains at robust levels.
The Euro meanwhile received some support from data, which showed that Producer Price Inflation across the 18-member Eurozone increased more than forecast in September. On a month on month basis PPI increased by 0.2%, an improvement on the preceding month’s figure of a fall of -0.1% and was better than the 0% figure forecast by economists.
On an annual basis PPI fell by -1.4%, unchanged from the previous month.
The Pound will experience volatility against the US Dollar later in the session as economists await the release of data. More positive figures out of the world’s largest economy and we can expect to see the GBP/USD exchange rate give up earlier gains.
GBP/EUR Exchange Rate regains on European Commission Revision
The earlier losses made by the Pound against the Euro eased as the session progressed after the European Commission announced that it had cut its forecasts for economic growth in the Eurozone and reduced its expectations for inflation as data out of Germany and other Eurozone members was disappointing last month. The EC cut its forecast for economic growth in the 18 nation euro zone to 0.8% this year, from 1.2% in the spring. It now forecasts that the economy will grow by 1.1% in 2015, down from 1.7% previously.
The commission also added that it expects inflation in the Euro area to remain below the European Central Bank’s (ECB) target of just under the 2% level until at least 2016. It also warned that unemployment levels will remain at their current high levels for longer than previously hoped. The announcement is likely to do little to ease fears over the strength of the Eurozone economy.
GBP/EUR Exchange Rate Little Moved Ahead of PMI and Retail Sales Data
The Pound was little moved against the Euro at the start of Wednesday’s session as investors took a wait and see approach to the days economic data releases. Of particular interest will be the latest Eurozone and UK Services PMI data.
With the services sector being the dominant part of the UK economy a fall in the PMI will likely soften Sterling.
More weakness out of the Eurozone will also likely weigh upon the Euro as it will do little to ease concerns that the regions economy is heading towards a triple dip recession.
Eurozone retail sales data is also due for publication.
Weaker than forecast data out China also weighed upon the Euro as activity in the service sector of worlds second largest economy fell last month, adding to concerns over a global economic slowdown.
GBP/EUR Exchange Rate Mixed after data releases
The Pound was holding ground agains the Euro after data out of both the UK and Eurozone disappointed the markets.
Activity in the UK’s dominant service sector fell to a more than one year low in October as domestic demand slowed. The service sector in the 18-member Eurozone also declined, adding to concerns over the economic strength of the regions economy. Retail sales also fell much more than expected. More pressure is now building on the European Central Bank to introduce new measures to tackle low growth and falling inflation when policy makers gather for its monthly meeting on Thursday.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Recoups Losses on Sales Flop
Although the GBP/EUR exchange rate initially softened after the UK’s Services PMI fell short of forecasts, the Pound was able to recoup losses against the Euro thanks to the release of less-than-impressive retail sales figures for the Eurozone.
The steepest slide in sales since 2012 left the Euro trending in a weaker position against the majority of its currency counterparts. The GBP/EUR exchange rate achieved a high of 1.2793.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Mixed Ahead of Bank of England and ECB Policy Meetings
The Pound to Euro exchange rate was mixed early in Thursdays session as market attention turned to the latest Bank of England and European Central Bank policy meetings. Economists have raised their bets that BoE policy makers will strengthen their resolve to leave interest rates unchanged at the record low level of 0.5% as recent data has suggested that the UK economy is slowing down. The threat posed by the flagging Eurozone and a softening of the Chinese economy are also expected to be given as reasons for leaving rates unchanged. Policy makers at the ECB are also forecast to not alter policy but the press conference which follows the rate announcement will be closely watched to see if the bank is preparing to take further action to tackle the threat posed by deflation and falling growth.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.5976 ,
Pound Sterling,,Euro,1.2774 ,
Pound Sterling,,Australian Dollar,1.8549 ,
Pound Sterling,,New Zealand Dollar,2.0628 ,
US Dollar,,Pound Sterling,0.6258 ,
Euro,, Pound Sterling ,0.7826 ,
Australian Dollar,, Pound Sterling ,0.5390 ,
New Zealand Dollar,,Pound Sterling,0.4847 ,
[/table]
