Pound Euro Exchange Rate News: GBP/EUR Stutters as PMIs Make for Mixed Reading

Modified: Thursday, 24 March 2022 16:35 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Stutters as PMIs Make for Mixed Reading

Pound (GBP) Continues Slump Following Mixed PMIs

The Pound (GBP) is slipping against the Euro this morning, as today’s UK PMI data only provided a glimmer of hope going forward. Despite the Manufacturing PMI dropping to 55.5, falling further from the expected 56.7, the Services PMI jumped up from 60.5 to 61, beating out forecasts.

The Services PMI can limit losses on the Pound, but with the ongoing uncertainty of the Ukraine-Russia crisis and soaring living costs, the Sterling could encounter further obstacles down the line.

Chris Williamson, Chief Business Economist at S&P Global commented; “The UK PMI surveys indicated a sustained robust pace of expansion in March as the further reopening of the economy from COVID-19 containment measures helped offset headwinds from the Ukraine war, Brexit and rising prices. However, the outlook darkened as concerns over Russia's invasion exacerbated existing worries over soaring prices, supply chains and slowing economic growth.”

In the wake of data showing UK inflation soared to a 30-year high of 6.2% in February, Chancellor of the Exchequer Rishi Sunak delivered the Spring Statement yesterday. With many hoping the Chancellor would throw a lifeline to the flagging Pound in the way of tax cuts and other measures to curb soaring living costs. The unprecedented situation at present saw the Spring Statement as a mini-budget, with support promised to families affected most by the soaring living costs.

Ahead of the Spring Statement, Sunak said; “With inflation and interest rates still on the rise, it’s crucial that we don’t allow debt to spiral and burden future generations with further debt,”

However the Spring statement appeared to go down poorly with most analysts and was unable to offer much support to Sterling.

The Euro (EUR) Strengthens with Modest Gains as German PMI Surprises Market

The Euro started strongly against the Pound with the release of the PMI data out of Germany. Despite a drop across the board, a higher-than-expected fall at least provided some positivity. With March’s Manufacturing PMI edging lower to 57 from 58.2, beating out the expected 56, Services PMI came in at a surprise too; dropping to 54.8 from 55.5.

The Chief Business Economist at S&P, Global Chris Williamson said of the results: "The survey data underscore how the Russia-Ukraine was is having an immediate and material impact on the eurozone economy and highlights the risk of the eurozone falling into decline in the second quarter.”

With the ongoing Ukraine-Russia war still raging on, without an end in sight, market moods are dampened, affecting the EUR against most of its peers. If no further news comes out, or is relatively slow, it could boost the single currency.

GBP/EUR Exchange Rate Forecast: Will Softer Retail Sales Growth Weaken the Pound?

Looking ahead, the Pound Euro (GBP/EUR) exchange rate could come under pressure tomorrow with the release of the UK’s latest retail sales data. Tomorrow’s retail sales figures could act as a headwind for Sterling, with economists forecasting sales growth will have slowed from 1.9% to 0.6% in February in light of rising living costs.

For EUR investors the focus will be on the latest IFO business climate index from Germany. Will a sharp deterioration in business morale this month weigh on the Euro?

Meanwhile, market focus will largely remain on any fresh developments coming of Ukraine as President Joe Biden is expected to meet with NATO and European leaders in an emergency summit. With further sanctions expected, or if a more dramatic course of action is to be announced, the ongoing humanitarian crisis will have a direct impact on the GBP/EUR.

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TAGS: Pound Euro Forecasts