Pound Euro Exchange Rate Forecast ? Movement Comes from Delayed PMI Reaction

May 5, 2016 - Written by James Fuller

STORY LINK Pound Euro Exchange Rate Forecast ? Movement Comes from Delayed PMI Reaction

The Pound has been soft against a number of rivals of late, possibly due to the UK's PMI results finally being recognised by investors for what they are - warning signs for the UK economy.

The appeal of the Pound to investors over the course of tomorrow and the weekend may end up being decided by the results of the extremely varied UK local elections, which are expected to be reported sporadically.

GBP/EUR Exchange Rate Climbs after Dovish ECB Bulletin

The Pound Sterling euro exchange rate GBP EUR was pulled in opposing directions during this morning’s session. The shared currency came under sustained selling pressure during early trading thanks to the publication of the European Central Bank’s latest Economic Bulletin at 0900hrs BST.

The euroland’s reserve bank once again emphasised that it is determined to steer continental Europe’s economy away from a confidence-sapping period of deflation; the report emphasised that the ECB is adamant that, ‘it is crucial to ensure that the very low inflation environment does not become entrenched.’ The ECB went on to suggest that it, ‘will continue to monitor closely the evolution of the outlook for price stability and, if warranted to achieve its objective, will act by using all the instruments available within its mandate.’

The heavy hint that an extension, or even an increase to the level of monthly asset purchases carried out in the name of its Quantitative Easing programme may be on the cards, triggered selling pressure on the euro.

GBP Exchange Rates Climb despite Weak Services Data

The shared currency was already under pressure when today’s Economic Bulletin was published thanks to the downbeat assessment of the euroland economic situation by the European Commission (EC) earlier this week.

The EC slashed its euroland Gross Domestic Product growth forecast for this year and next to 1.6% and 1.8% respectively. Perhaps more worryingly the EC predicts that regional inflation will tip the scales at only 0.2% during 2016. While official forecast remain at these ultra-low levels, the euro will struggle against Sterling.

However, the primary data release from the UK this morning provided a drag on the Pound euro exchange rate. The latest Markit survey of the UK’s combined services industries revealed that the pace of expansion of the UKs’ tertiary sector had slowed to its lowest level in some three years.

The generalised outlook for the Pound has slipped on this disappointing figure.

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TAGS: Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts