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GBP EUR Exchange Rate Forecast Pound Euro Dips

July 23, 2021 - Written by John Cameron

The Pound Euro (GBP/EUR) exchange rate has dipped since markets opened this morning as the latest flash PMI figures from the UK showed a sharp slowdown in growth.

At the time of writing the GBP/EUR pairing are trading around the 1.1650 level as flash PMI figures from the Eurozone hit a 21-year high.

Pound (GBP) Exchange Rate Stumbles on Disappointing Economic Data

The Pound has found itself stumbling against the Euro this morning as both UK retail sales, along with flash PMI figures left investors disappointed.

Whilst retail sales rebounded during June by 0.5%, many experts were less than optimistic going forward about consumer spending:

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, commented on the rebound, saying:

‘Retail sales probably will fall back over the coming months. The temporary boost to food spending from Euro 2020 will fade, while higher confidence does not appear to be translating to higher levels of economic activity, due to the recent rise in Covid-19 cases. Indeed, footfall at retail locations has trended down recently and last week was 75% of its level two years ago, down from the peak of 86% in the first week of June, according to Springboard.’

More so, the latest flash PMI figures from the UK for July disappointed markets as the data showed a slowdown in economic growth.

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

‘Concerns over the Delta variant have meanwhile overshadowed the passing of “freedom day”, and were a key factor alongside Brexit and rising costs behind a sharp slide in business expectations for the year ahead, which slumped to the lowest since last October. The PMI indicates that GDP growth will likely have slowed in the third quarter, after having rebounded sharply in the second quarter.’

Euro (EUR) Exchange Rate Supported by Eurozone PMI Figures

The Euro has found support against the Pound this morning as the latest flash PMI figures from the Eurozone impressed investors.

Eurozone business activity expanded at the fastest pace since 2000 in July as the bloc continues to reopen from coronavirus lockdown restrictions.

Chris Williamson, Chief Business Economist at IHS Markit spoke on the Eurozone rebound:

‘The eurozone is enjoying a summer growth spurt as the loosening of virus-fighting restrictions in July has propelled growth to the fastest for 21 years. The services sector in particular is enjoying the freedom of loosened COVID-19 containment measures and improved vaccination rates, especially in relation to hospitality, travel and tourism.’

GBP to EUR Exchange Rate Outlook: German Business Climate in Focus

For Pound investors, heading into next week an absence of economic data will see all eyes on any further domestic coronavirus developments.

For Euro traders, the start of next week will bring the latest German business climate index, which if rises could see the single currency trending higher.

More so, later on in the week, German unemployment change along with inflation figures could provide fresh support to EUR exchange rates going forward.

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