GBP EUR Exchange Rate Retains Lead on Positive UK Manufacturing PMI

November 1, 2017 - Written by Tim Boyer

STORY LINK GBP EUR Exchange Rate Retains Lead on Positive UK Manufacturing PMI

The Pound Euro exchange rate retained its lead this morning as markets prepared for tomorrow’s Bank of England (BoE) rate decision whilst responding to a positive UK Markit manufacturing PMI.

UK Data Proves Positive – GBP Exchange Rates Climb

Data relating to the Pound today proved better than expected, with the UK Markit manufacturing PMI printing at a reading of 56.3 for October, above the previous period’s 56.0 and the consensus of 55.8.

Production and new orders were demonstrated to be on a continued rise, with companies benefiting from robust domestic market conditions and an ever rising inflow of new export business from Europe, the United States and Australia.

Job creation within the sector also performed well, hitting its highest level in 40 months.

Rob Dboson, IHS Markit’s Director, shared his thoughts on the figures, stating that the sector had made ‘an impressive start,’ he continued:

‘The sector looks to be achieving a quarterly rate of expansion close to 1%, therefore sustaining the solid pace of growth signalled by the official ONS estimate for the third quarter. The domestic market remained strong, whereas new export orders increased at a slightly slower pace, the latter showing signs of being hit by the recent strengthening of Sterling’.

This news should dispel any lingering doubts regarding whether the BoE will move for a rate hike tomorrow, a possibility that has given Sterling even more lift.

Euro (EUR) Exchange Rates Bearish amid Catalonia Unrest

Yesterday saw two very notable data releases pertaining to the Euro; the Eurozone’s GDP estimate and the Eurozone’s inflation print.

Whilst GDP in the Euro Area proved very positive (rising to 2.5%, up from previous 2.3% and consensus 2.1%), inflation within the bloc continued to prove problematic at 1.4% (year-on-year).

In other news, Catalan President Carles Puigdemont and staff have fled to Brussels, leaving attention in Catalonia to switch to the possibility of a snap regional election in December called by Madrid.

Puigdemont has asserted that he will accept the result of said election, though it remains extremely unclear whether he, or indeed any other pro-independence candidate will be able to take part.

It is also being reported that the Government of Catalonia has sent representatives to Estonia in a bid to learn aspects of their e-residency program, with talks also taking place between Barcelona cryptographers and Vitalik Buterin, the founder of blockchain platform Etherium, regarding the development of a new blockchain currency similar to Syriza’s plan B during the Greek financial crisis. This would essentially create a currency outside of the control of both Spain and the European Central Bank (ECB) – a prospect that could prove an extremely destabilising influence on the bloc.

Beyond this, Euro traders remain cautious with today being the Federal Reserve’s rate announcement and with ‘Super Thursday’ fast approaching.

GBP Exchange Rate Forecast Bolstered on NIESR Forecast

BoE rate hike hype reached fever pitch today on a report from the National Institute of Economic and Social Research (NIESR) which claimed that the BoE is set to lift the policy rate by 25 basis points this month followed by rate hikes every six months until it reaches a 2% target.

The think tank’s forecast for inflation is that it will peak at 3.2% before the end of this year before eventually easing back down to the target 2% rate in the 2nd half of 2019.

This news added fuel to the fire of speculation regarding whether the BoE will begin a cycle of tightening tomorrow, or simply push rates to 0.50% before easing off, with hype for the former prospect keeping GBP EUR firmly in the Pound’s favour.

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: Pound Euro Forecasts