The Pound Sterling to Euro (GBP/EUR) exchange rate continued to advance on Monday following the release of better-than-forecast UK Manufacturing PMI data, against the US Dollar the Pound softened on strong US ISM data.
Sterling also made gains versus a number of its major currency peers.
Activity in the UK’s manufacturing sector rebounded strongly in October and confounded economist expectations for a slowdown, as strong domestic demand countered the ill effects created by the faltering Eurozone.
According to Markit/CIPS, its latest UK Manufacturing Purchasing Managers Index (PMI) increased to 53.2 from 51.5. The unexpected rise means that activity improved by its fastest pace in three months. The strength of the domestic market saw new orders rise from the previous month’s figure of a 17-month low to its highest since July, confounding forecasts for a figure of 51.2.
Despite the positive figure, some analysts were concerned that new orders from overseas had fallen at their fastest pace in 21 months adding to Bank of England policy makers’ worries over the weakness in the Eurozone economy.
‘Although the pace of expansion remains below that seen at the start of the year it is positive to see the sector break its recent sequence of slower growth. However, this was partly offset by a further drop in new business from overseas, as exporters were hit by a near-stagnant Eurozone economy and a relatively strong Euro-Sterling exchange rate,’ said Markit senior economist Rob Dobson.
Against the Euro, the Pound advanced above the 1.28 level before easing slightly as traders embarked on a bout of profit taking.
Euro Exchange Rate Woes Persist
With the Eurozone economy struggling, the Euro is forecast to remain under pressure for most of the week. In focus will be the latest European Central Bank (ECB) policy meeting. Economists are expecting the bank to leave interest rates at record lows but are hoping for tougher rhetoric about how it will help create growth and tackle the growing threat from deflation.
Strategists at Barclays are now expecting the ECB to announce a Eurozone quantitative easing programme by the first quarter of 2015.
The single currency came under more pressure on Monday after the latest Manufacturing PMI data out of Germany came in below expectations and as the PMI for the whole Eurozone fell unexpectedly. Concerns are building that the Eurozone is sliding towards a triple dip recession.
Against the US Dollar, the Pound inched higher but further gains are forecast to be restrained as investors focus on the upcoming ISM manufacturing report due later in the session. Another positive piece of data and we can expect the
‘Greenback’ to make further gains against its major peers.
For Sterling, market attention will now look ahead to Wednesday’s Services PMI data release and Thursday’s Bank of England Interest Rate decision.
Pound Sterling (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,1.5973 ,
Pound Sterling,,Euro,1.2789 ,
Pound Sterling,,Australian Dollar,1.8354 ,
Pound Sterling,,New Zealand Dollar,2.0671 ,
US Dollar,,Pound Sterling,0.6260 ,
Euro,, Pound Sterling ,0.7819 ,
Australian Dollar,, Pound Sterling ,0.5449 ,
New Zealand Dollar,, Pound Sterling,0.4838 ,
[/table]
