EUR/USD, EUR/GBP Exchange Rates Forecast to Flop as Eurozone PMI Falls
The Euro to Pound (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates have been trending higher after Markit’s UK Construction Purchasing Managers Index (PMI) fell in October and ahead of US Trade Balance data. However, with the European Commission Economic Forecast proving so unfavourable, it is likely the Single Currency will tumble.
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US Dollar Exchange Rate Continues to Strengthen
At present, the ‘Buck’ is hovering near a five-year high as economists’ speculate that US data will impress this week. Tuesday will see the release of US Factory Orders figures, whilst Wednesday will see Mortgage Applications, Employment Change and ISM Non-Manufacturing Composite stats.
Furthermore, Wednesday will also see Federal Reserve officials speak at various events. The tone they adopt may impact the US Dollar exchange rate. The most influential data for the US Dollar this week will be US Unemployment Rate and Change in Non-Farm Payrolls figures, out on Friday.
Pound Exchange Rate Softening on Construction Slowdown
Meanwhile, the Pound could soften further after the Markit UK Construction PMI fell further than economists had expected. September’s report showed the construction index reaching 64.2 index points, but October’s reading was predicted to soften to 63.5. However, the actual figure fell far lower and came in at only 61.4.
Despite the pace of manufacturing growth being the slowest in October since May, Markit suggests that the ecostat is still favourable. The report read: ‘The index remained well above the neutral 50.0 mark and as much higher than the long-run survey average.’
European Commission Slashes Growth Forecasts, Leaving Euro Vulnerable
The Euro may take a sudden downturn in the market after the European Commission slashed its economic forecasts. Growth in the Eurozone for 2015 is expected to reach only 1.1%, a negative revision from the previous 1.7% prediction.
Economic chief of the commission Pierre Moscovici commented: ‘There is no single, simple answer to the challenges facing the European economy. We must all assume our responsibilities, in Brussels, in national capitals and in our regions, to generate higher growth and deliver a real boost to employment for our citizens.’
The EUR/USD exchange rate has been trending in the region of 1.2518, while the EUR/GBP currency pair is presently attaining 0.7820.
Euro Softness Continues as UK Growth Forecast Upgraded
The Euro is forecast to continue softening against the Pound as the UK found its growth expectations raised by the European Commission on Tuesday. The report read: ‘Growth has been buoyant so far in 2014, at 0.7% and 0.9% in Q1 and Q2, respectively taking growth from 1.7% in 2013 to 3.2% in the year to Q2 2014. Momentum is expected to continue in 2015 and 2016 with growth projected at 2.7% and 2.5% respectively.’
The European Commission suggests that ‘robust’ consumer spending will keep the UK expansion buoyant, whilst the Euro area has had growth forecasts slashed across the board. The Eurozone has struggled in its economic recovery since the onset of the global financial crisis, whereas the UK has made extensive progress.
The US Dollar may soften following the release of Factory Orders figures which fell by -0.6% in September, marking the second consecutive month of weakness in the sector. The drop in orders were in line with Wall Street expectations; however, the data is unlikely to offer the US Dollar much support.
Factory orders plunged by -10.1% in August when the US experienced a drop in demand for commercial aircraft.
Wednesday’s Data Releases hold Potential to Impact EUR/USD, EUR/GBP Exchange Rates
UK Markit Services and Composite figures are out on Wednesday which could see Sterling advance against other majors. Eurozone Retail Sales stats will also be released; however, the most influential domestic data will be the US ISM Non-Manufacturing Composite which has been forecast to fall from 58.6 to 58 in October.
Furthermore, there will be a host of Federal Reserve representatives speaking on Wednesday which could encourage US Dollar movement. Any hawkish central bankers could encourage the ‘Greenback’ to become bullish.
EUR/USD Sinks on Final PMI Figures EUR/GBP Remains Steady
The Euro has fallen versus the US Dollar after Markit released its final Purchasing Managers Indexes for Italy, France, Germany and the Eurozone. Final stats for Germany and the Eurozone were below economists’ expectations, while both Italian and French figures were upwardly revised. The German Composite PMI fell to 53.9 from the initially forecast 54.3 and the Eurozone Composite PMI softened to 52.1 from 52.2.
Eurozone Retail Sales numbers could further alter the Euro exchange rate on Wednesday, with figures presently forecast to fall on the year to 1.4% from 1.9%. Meanwhile, the US Dollar is likely to see movement from the ISM Non-Manufacturing Composite later this afternoon.