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Pound euro exchange rate: Ongoing eurozone economic woes fail to help GBP Sterling


Yesterday’s shock news that Italy had entered a recession has been furnished today with more gloomy Eurozone figures in the form of the latest manufacturing PMIs. The Purchasing Mangers Indexes, which give a snapshot of the state of the private sector – in this case manufacturing – came in generally disappointing this morning. While the January Eurozone PMI as a whole printed at a steady 50.5, indicating no change from the previous month, Germany reported a worse-than-expected drop to 49.7, pointing towards a manufacturing sector in a state of contraction. Italy’s was even worse, coming in at 47.8 – with anything below 50 representing a contraction – although declines were balanced out by positive expansions in both France and Spain.

The UK also released its latest manufacturing PMI this morning, which indicated a slowdown to 52.8, although this still remains in expansion territory.

Yesterday’s Eurozone GDP figures revealed the bloc as a whole grew at a rate of 0.2 per cent in the last quarter of 2018, which was on forecast, but it could still could give euro traders little cause for believing the European Central Bank (ECB) will raise interest rates any time soon.

Following the GDP data release ECB executive policymaker Yves Mersch spoke about his vision for consolidation within the EU and “strengthening the backbone of the European financial market”.

Although markets generally chose to focus on fundamentals instead, causing the GBP/EUR exchange rate to strengthen throughout the day.

In the absence of any new developments on the Brexit front, traders are looking ahead to next week’s data, with eurozone services PMIs and retail sales due out on Monday.

Following yesterday’s revelation of a sizeable slump in retail sales in December, traders will be on the lookout to see whether this has translated to the Eurozone as a whole.

If it has, we can expect to see some upside pressure on the pound euro exchange rate at the start of next week’s session.



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