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Pound Euro Exchange Rate Falls as March’s UK Services PMI is Revised Down

April 7, 2021 - Written by John Cameron

GBP/EUR Exchange Rate Sinks as UK Markets Become Increasingly Cautious

The Pound Euro (GBP/EUR) exchange rate fell by -0.8% today after the UK’s Services PMI for March was revised lower due to a decrease in business activity. The pairing is currently fluctuating around €1.15.

Tim Moore, Economics Director at IHS Markit, commented on the data:

‘UK service providers were back in expansion mode in March as confidence in the roadmap for easing lockdown restrictions provided a strong uplift to new orders. Total business activity increased at the fastest rate since August 2020 and this return to growth ended a four-month sequence of decline.’

However, UK markets are remaining cautious as Covid-19 infection rates continue to climb higher in Europe, leaving Sterling investors concerned that this could spill over into the UK in the next few weeks or months.

Prime Minister Boris Johnson has previously warned that the virus could ‘wash up’ in the UK.

As a result, this has left some GBP investors somewhat subdued.

Today also saw news that key UK medicines regulators are holding a briefing over the links between the Oxford AstraZeneca vaccine and rare blood clots.

Any further complications in vaccines would slow down the UK Government’s vaccination programme and weaken the GBP/EUR exchange rate.

Euro (EUR) Exchange Rate Heads Higher as Eurozone Business Activity Bounces back in March

The Euro (EUR) rose today following the publication of the latest Eurozone Composite PMI for March, which beat forecasts and rose to 53.2.

Chris Williamson, Chief Business Economist at IHS Markit, commented:

‘Eurozone business activity bounced back in March, returning to growth after four months of decline with an even stronger expansion than signaled by the forecast-beating ‘flash’ data.

‘Manufacturing is booming, led by surging production in Germany, and the hard-hit service sector has come close to stabilizing as optimism about the outlook improved further during the month. Firms’ expectations of growth are running at the highest for just over three years amid growing hopes that the vaccine roll-out will boost sales in the coming months.’

Euro investors are remaining cautious, however, as key economies in the Eurozone are facing a rising number of Covid-19 infections.

If these continue to increase, then we could see the EUR/GBP exchange rate swiftly begin to fall over the course of the week.

GBP/EUR Exchange Rate Forecast: UK Construction PMI in Focus

Euro (EUR) traders will be awaiting tomorrow’s release of the latest German Factory Orders figure for February.

Any improvement in the outlook for the German economy would further boost the EUR/GBP exchange rate.

GBP investors will be monitoring tomorrow’s release of the UK Construction PMI for March.

The Pound Euro (GBP/EUR) exchange rate would also head higher if the UK’s Covid-19 infections show signs of decreasing.

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TAGS: Euro Pound Forecasts Pound Euro Forecasts

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