GBP/EUR Exchange Rate Softens to Weekly Low on Cool UK Services
A combination of negative British economic data and positive European data has seen the Pound Sterling to Euro exchange rate dip to a fresh weekly low on Friday. The soft British data has been particularly detrimental to a Pound which has already suffered from fading trader sentiment after a Bank of England policymaker gave a dovish speech on Thursday.
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The Pound Sterling to Euro exchange rate is currently trending in the region of 1.2720.
Thursday saw the Pound decline against the majority of its most traded currency competitors after the Bank of England’s newest policymaker gave her maiden speech in London. In the speech Kristin Forbes suggested that Sterling’s positive performance over the past year or so has helped keep inflation below 2.0%, but that could change as Sterling’s appreciation heads towards a plateau.
Despite the European Central Bank laying on plans to purchase rebundled packets of debt to firm up the flagging Eurozone economy, the fact that they avoided full-blown quantitative easing improved trader sentiment towards the single currency. Keeping the bank rate at the record-low 0.05% was not a surprise to anyone and therefore didn’t affect the Euro exchange rate.
The Pound Sterling to Euro exchange rate has hit a low today of 1.2717.
Friday’s British data has helped Sterling continue trending lower against the majority of its currency rivals. The Composite PMI was forecast to reduce a little from 59.3 to 58.2, but the actual result saw a greater declination to 57.4. Similarly the Services PMI was expected to fall a little from 60.5 to 58.7, but the actual data fell further to 58.7.
Chris Williamson, Chief Economist at Markit, said of the services PMI; ‘The strong pace of job creation signalled by the PMI surveys should eventually lead to higher pay growth and rising personal incomes, something which we expect to see materialise towards the end of the year and putting pressure on policymakers to raise interest rates in the first half of next year. The worry is that the economy could slow faster than anticipated. Manufacturing growth slowed to a crawl in September and business optimism has fallen to the lowest for almost a year in the construction sector. If there is a knock-on effect to the vast services sector, the economy will lose its main source of growth’.
European data has been reasonably positive on Friday. The German Composite and Services PMIs outperformed the market consensuses and improved upon the previous figures. Also the yearly Eurozone Retail Sales data printed impressively at 1.9% despite predictions of a 0.7% growth.
Forecast for the Pound to Euro Exchange Rate
With no more data releases for either Britain or Europe on Friday it is likely that the GBP/EUR exchange rate will continue to trend lower. It is unlikely to change over the course of the weekend unless an unscheduled economic event forces an alteration.