The Pound (GBP) to Euro (EUR) exchange rate was trading close to a two-year high on Monday after another bout of data releases out of the single currency bloc disappointed and as concerns increased over the Ukraine crisis.
First up was Gross Domestic Product (GDP) data out of the region’s largest economy, Germany. The nation’s economy contracted by 0.2% in the second quarter of the year, increasing speculation that the European Central Bank will introduce new monetary easing measures to tackle the threat of deflation and create growth.
The cause for the GDP decline was blamed on a 1.4% plunge in retail sales, the biggest drop recorded since 2012 as consumers were spooked by events in Ukraine.
Following on from the German GDP data came the latest Eurozone Manufacturing Purchasing Manager Index (PMI) data.
The data showed that the outlook for manufacturing in the Eurozone is at its worst level for more than a year.
The Markit compiled Eurozone Manufacturing PMI fell to a reading of 50.7 last month, a steep drop from the 51.8 recorded in July. The figure was also worse than the 50.8 figure forecast by analysts. According to PMI data, any figure above 50 indicates expansion, whilst a number below indicates contraction.
Concerns over the crisis in Ukraine have also hammered demand for the single currency. Fighting continued in the east of the country as pro-Russian rebels drove Ukrainian forces out of Luhansk airport.
European leaders gathered over the weekend in Brussels to discuss their response to Russia involvement in the fighting. The markets were rattled on worries that newer, harsher sanctions could be introduced a move that will have negative consequences for the already weak Eurozone economy.
Further gains for the Pound were somewhat restrained after a report showed that the UK’s manufacturing sector expanded at its slowest pace in 14 months. Markit research group said the U.K. manufacturing purchasing managers’ index ticked down 52.5 in August, from a downwardly revised 54.8 in July. Analysts had expected the index to rise to 55.0 last month.
Despite that, UK companies remain confident over the health of the economy.
A survey of almost 300 businesses by the EEF manufacturing group suggested a continued positive picture, with plans to invest in machinery and recruit employees that are more skilled. Investment intentions have been positive for 17 consecutive quarters,
Pound Sterling to Euro Exchange Rate Forecast
The Pound is forecast to remain trading higher against the Euro for the rest of the week as the European Central Bank’s policy meeting draws closer. If the latest UK Services and Construction PMI’s continue to show strength then the disparity between the UK and Eurozone economies is likely to weigh further on the Euro.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3135 ,
Euro,, Pound Sterling,0.7900 ,
Euro,,Australian Dollar,1.4056 ,
Euro,,Canadian Dollar,1.4265 ,
Pound Sterling,,Euro,1.2656 ,
US Dollar,,Euro,0.7613 ,
[/table]
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