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GBP/EUR Outlook: Pound to Euro Exchange Rate Gains as UK PMI Impresses

March 1, 2021 - Written by John Cameron

The Pound to Euro exchange rate was gaining this morning, as the UK's Manufacturing PMI for February gave extra support to GBP.

At the time of writing the pair are currently trading at around 1.1572.

UK Manufacturing PMI Adds Support to Sterling (GBP)

The Pound was supported this morning from the release of the UK’s final manufacturing PMI for February, which slightly beat forecasts and showed another growth in the sector.

The data came in at 55.1, which is up from 54.1 on the previous month, showing modest growth in the sector for February despite the continued national lockdown.

However despite beating forecasts, Rob Dobson, Director at IHS Markit warned about the figures saying:

“The UK manufacturing sector was again hit by supply-chain issues, COVID-19 restrictions, stalling exports, input shortages and rising cost pressures in February. Look past the headline PMI and the survey reveals near stagnant production, widespread shipping and port delays and confusion following the end of the Brexit transition period.’

‘With current constraints likely to continue for the foreseeable future, pressure on prices and output volumes may remain a feature during the coming months.’

Sterling has been further supported by the continued success of the coronavirus vaccine rollout across the UK, with more than 20 million people now having received their first dose of the vaccine.

Euro (EUR) Falls Despite Positive Manufacturing PMI from Germany and Eurozone

The Euro was down this morning, despite positive Manufacturing PMI data from both the Eurozone, and the Eurozone’s largest economy Germany.

The German Manufacturing PMI data slightly beat forecasts coming in at 60.7 and up from 57.1 in January.

Phil Smith, Associate Economics Director at IHS Markit commented on the data saying:
"German manufacturing saw strong growth in February on the back of an increasingly positive trend in export orders. Capital goods producers noted a particularly strong performance, in a sign of increasing investment spending.’

Furthermore, the Eurozone Manufacturing PMI data showed the fastest growth in the sector for three years, which rose to 57.9 in February.

Chris Williamson, Chief Business Economist at IHS Markit said:

“Manufacturing is appearing as an increasingly bright spot in the Eurozone’s economy so far this year. The PMI has reached a three-year high to run at a level that has rarely been exceeded in more than two-decades of survey history – notably during the dot-com bubble, the initial rebound from the global financial crisis and in 2017-18.

GBP/EUR Exchange Rate Forecast: UK Budget in Focus

Pound investors will be looking towards Chancellor Rishi Sunak’s spring budget on Wednesday, with Sunak expected to extend furlough to help those affected by the coronavirus pandemic, investors will look to see if fiscal stimulus support continues.

Euro traders will be focusing on the Eurozone’s flash year-on-year inflation rate data for February which is expected to come in at 0.9%, though if it beats forecasts and rises could add support to the Euro.

Euro traders will also be looking towards key speeches from the European Central Bank (ECB) this afternoon, with any further dovish commentary surrounding the delay in vaccine rollout across the EU adding pressure to EUR.

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