ExchangeRates.org.uk - At time of writing GBP/EUR was trading at around €1.1769. Up roughly 0.3% from Thursday’s opening levels. The Pound (GBP) appreciated on Thursday as GBP investors welcomed the release of the UK’s latest PMIs. According to data published by S&P Global, both the UK manufacturing and service sectors grew at a faster-than-expected pace this month. Resulting in the fastest rise in UK private sector output since April. The PMIs also painted a picture of broad-based strength UK’s private sector, with key indicators such as economic growth and job creation printing positively. While inflation pressures as a whole continued to moderate, analysts suggest signs of persistent services inflation could give the Bank of England (BoE) pause for thought when it comes to a potential September interest rate cut., another factor underpinning the pound on Thursday morning.
Euro (EUR) Muted Following Mixed Eurozone PMIs
The Euro (EUR) was subdued on Thursday as EUR investors digested some mixed PMIs from the Eurozone. August’s preliminary figures reported that activity in the bloc’s private sector outpaced expectations. The composite climbing from 50.2 to 51.2 against forecasts it would drop to 50.1 However, this uptick in activity was very one sided as while the services PMI rose from 51.9 to 53.3, the manufacturing PMI slipped from 45.8 to an eight-month low of 45.6. Analysts were also quick to point out that the surprise strong uptick in service sector activity is likely linked to France’s hosting of the Olympics and therefore will be temporary.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said: ‘At first glance, this looks like a pleasant surprise: activity in the Eurozone picked up in August. But a closer look at the numbers reveals that the underlying fundamentals might be shakier than they appear. The boost largely comes from a surge in services activity in France, with the Business Activity Index jumping by almost five points, likely linked to the buzz surrounding the Olympic Games in Paris. It’s doubtful this momentum will carry over into the coming months, however. ‘Meanwhile, the overall pace of growth in the services sector has slowed down in Germany, and the eurozone’s manufacturing sector remains in rapid decline.’
The PMIs also highlighted an easing of cost pressures in the private sector, which increases the chances of the European Central Bank cutting interest rates again in September.
GBP/EUR Exchange Rate Forecast: BoE Bailey Speech to Inject Volatility into Sterling?
Looking ahead, to the end of the week, movement in the Pound Euro exchange rate is likely to be driven by the tone struck by BoE Governor Andrew Bailey as he speaks at the Federal Reserve’s annual Jackson Hole symposium. Bank sources have suggested that Bailey’s speech will focus on the impact of past monetary policy decisions, rather than on how it will shape policy in the months to come. However, GBP investors will still be hoping that Bailey offers even the slimmest insight into how the bank might vote next month. If the BoE governor provides any hints that a September rate cut might be on the table, we could see the pound face some headwinds. At the same time, while Eurozone data is in short supply on Friday, the euro’s negative correlation with the US dollar could strengthen the single currency if Fed Chair Jerome Powell strikes a dovish tone in his keynote speech at Jackson Hole.
This content was originally published on ExchangeRates.org.uk
