Pound Sterling to Euro (GBP EUR) Exchange Rate Plunges Despite Solid PMIs

October 4, 2016 - Written by Toni Johnson

STORY LINK Pound Sterling to Euro (GBP EUR) Exchange Rate Plunges Despite Solid PMIs

The Pound to Euro exchange rate plummeted throughout Monday’s session as investors reacted to weekend comments from UK Prime Minister Theresa May announcing Britain’s formal Brexit process would begin by the end of March 2017.

GBP/EUR began the week trading at around 1.1538, but quickly plunged as markets opened and reacted to May’s comments. By Tuesday morning, the pair had hit lows not seen since July 2013 and was within a cent of five-year-lows.

Pound (GBP) Exchange Rates Struggle to Hold Ground on Strong PMIs

Sterling was sold off en masse versus its major rivals throughout Monday’s trade session as markets reacted to comments made by UK Prime Minister Theresa May over the weekend.

May confirmed that the British government would begin the formal Brexit process by activating Article 50 before the end of March 2017. This, as well as indications that Britain would give up on access to the European Union’s single market, sent UK markets into panic mode.

As a result, Sterling plunged and was unable to benefit even from the week’s better-than-expected September PMIs from Markit. Monday’s Manufacturing PMI jumped from 53.4 to 55.4 but failed to prevent GBP/EUR from losing almost a cent in value.

Tuesday’s Construction PMI, on the other hand, was notable in that it resulted in the first UK Construction PMI in months to score above contraction, gaining from 49.2 to 52.3. While this slightly softened Sterling’s selloff on Tuesday, the British currency was still sold off across the board.

Euro (EUR) Exchange Rates Firm on ECB Comments and Eurozone Data

The Euro has been able to hold its ground thus far this week despite a lack of strong key ecostats, thanks to some lower-influence PMIs beating expectations, as well as comments from European Central Bank (ECB) officials.

Monday’s session saw the publication of the Eurozone’s final September Manufacturing scores from Markit. While German and overall Eurozone scores met preliminary estimates, Italian and French Manufacturing beat expectations.
Comments from ECB official Yves Mersch also bolstered the Euro slightly, as he indicated hesitance towards further monetary easing from the central bank.

However, the Euro remained relatively limp against non-Sterling rivals. This was largely due to the strength of the US Dollar, as well as ongoing concerns regarding Germany’s Deutsche Bank issue and Greek economic woes.

GBP/EUR Exchange Rate Forecast: Slew of PMI Results Wednesday

So what next for the Pound Euro (GBP EUR) exchange rate?

As the Pound’s Brexit-inspired selloff slowed on Tuesday, the pair may have a solid chance of recovery on Wednesday depending on the strength of the day’s Services and Composite PMIs from Markit.

Reports will be published for Britain as well as various Eurozone countries including Germany and France. The Eurozone prints are final results, and are expected to meet previously published preliminary scores.

As Britain’s Manufacturing and Construction PMIs beat expectations in both August and September, an improvement in Services as well would lead to a strong Composite score for September. This could cheer UK markets and improve hopes for Q3 growth.

Wednesday’s session will also see the publication of August retail sales figures for the Eurozone.

Ultimately, unless Brexit concerns continue to demand market attention, GBP/EUR could recover from its worst levels rather than fall below the 1.14 level of key psychological resistance.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Euro Forecasts Euro Pound Forecasts Pound Euro Forecasts