Euro Pound Sterling (EUR/GBP) Exchange Rate Flat as UK Factories Lose March’s Pre-Brexit Stockpiling Boost

May 1, 2019 - Written by John Cameron

STORY LINK Euro Pound Sterling (EUR/GBP) Exchange Rate Flat as UK Factories Lose March’s Pre-Brexit Stockpiling Boost

Euro Pound (EUR/GBP) Exchange Rate Muted as Brexit Stockpiling Eases

The Euro Pound Sterling (EUR/GBP) exchange rate remained muted, and the pairing is currently trading at an inter-bank rate of £0.8596.

Data released this morning revealed that factories in the UK lost March’s boost from pre-Brexit stockpiling.

The UK Markit manufacturing PMI fell from March’s 13-month high of 55.1 to a two-month low of 53.1.

In April, overseas demand decreased at the second-fastest rate in the past four-and-a-half years, with companies stating Brexit uncertainty was the main cause for the underlying decrease.

Commenting on the data, Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply said:

‘As Brexit prevarication continued, overseas clients took to action and found new supply chain routes away from the UK resulting in the second-fastest drop in new export orders in four-and-a-half years.

‘The mild rise in domestic orders was unable to meet this significant shortfall in business and with the extended Brexit deadline, the levels of stockpiling slowed as UK manufacturers turned their attention to building efficiencies instead. Concerns intensified over whether there would be enough demand in the coming months to dislodge current supplies and companies reviewed their staffing levels with employment falling for the third time in four months.’

Euro (EUR) Flat as ECB States Interest Rates are to Remain Low

On Wednesday, Vice President of the European Central Bank (ECB) Luis de Guindos said interest rates are likely to stay low for a long time.

This likely dampened sentiment for the single currency.

At an event in London, Guidos said:

‘The low interest rate environment is with us for the foreseeable future and is caused in large part by durable structural factors.

‘Even once monetary policy normalizes, interest rates are likely to remain below levels that were common in previous decades.’

However, due to May Day many Asian and European centres were closed.

Euro (EUR) Muted despite Jump in German Inflation

On Tuesday, data revealed that German annual inflation rallied to 2.1% in April, exceeding the European Central Bank’s target.

This was the first time since November that inflation met the bank’s 2% target.

However, reports suggest that the rise in inflation is likely due to the Easter holidays, as the cost of fuel and package holidays increased.

In a Tweet, ING Economist Carsten Brzeski noted:

‘Is #hyperinflation back? 2.1% in April! No, the Easter bunny is to blame.’

Euro Pound Outlook: Will the EUR/GBP Fall on a Disappointing German Manufacturing PMI?

Looking ahead to the start of Thursday’s session, the Euro (EUR) could fall against the Pound (GBP) following the release of the German manufacturing PMI.

If April’s PMI reveals that the German manufacturing sector continues to struggle, sentiment in the single currency could be dented.

Meanwhile, Sterling could fall following the release of the Bank of England’s (BoE) interest rate decision and monetary policy minutes.

If the bank leaves interest rates unchanged, but the minutes suggest that the BoE could be looking to cut interest rates in the future, the Euro Pound (EUR/GBP) exchange rate could rise.

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TAGS: Euro Pound Forecasts