industry

Pound euro exchange rate: GBP resilient on falling UK services PMI


The UK’s PMI data is compiled by analysts at IHS Markit.

Commenting on the data was Chief Business Economist Chris Williamson.

He said: “The service sector continued to report solid steady business growth in September which, alongside news of sustained expansions in both manufacturing and construction, suggests the UK economy expanded by just under 0.4 per cent in the third quarter.”

Despite this opening positivity, Mr Williamson later stated: “Brexit worries continue to dominate the outlook, keeping business optimism firmly anchored at levels which would normally be indicative of an imminent slowdown.”

Reinforcing this sentiment, Duncan Brock of the Chartered Institute of Procurement and Supply (CIPS) added: “Some firms are expecting the floodgate of new orders to be opened soon, but business confidence will remain at a low ebb in the last quarter if cost pressures deepen and negotiations around our EU departure remain unresolved.”

Today’s Eurozone news has been mixed – PMI readings have shown an overall composite slowdown but a services PMI rise in September.

Outside of this data, the euro has also been influenced by retail sales stats for August.

A faster pace of annual sales growth has been reported, alongside a negative print for monthly sales.

As the euro has failed to appreciate on this data, the implication is that euro traders are disappointed by the larger-than-forecast composite PMI decline and negative sales figure.

The next news which could influence GBP demand will be a speech from Prime Minister Theresa May, which is due to start just before noon today.

As well as summarising the Conservative Party’s plans, Mrs May could also talk about Brexit and might push the pound if she delivers a positive outlook on future negotiations.

This week’s remaining economic events will include German construction data and a speech from a European Central Bank (ECB) official, both on Thursday.

Germany’s construction PMI for September is predicted to show growth from 51.5 points to 52.9, which could push the euro higher against the pound.

Further support could come from ECB policymaker Benoit Coeure, who will be speaking to the French business community.

If Mr Coeure backs tighter monetary policy in the form of a 2019 interest rate hike, the euro could make additional gains against pound Sterling.



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