Pound V euro: GBP exchange rate fails to be lifted by services PMI
THE pound is trending narrowly against the euro this morning as investors react to the latest UK and Eurozone PMI figures.
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GBP/EUR is currently trending around the day’s opening levels at €1.124, relinquishing earlier gains.
According to data compiled and published by IHS Markit, the UK’s services index climbed from 53.8 to 54.2 in December.
This figure just beats expectations of a rise to 54.1 and bucks the downtrend seen in both the manufacturing and construction PMIs earlier this week.
However, despite the uptick in activity, GBP/EUR was still forced to retreat from its best levels as the index suggested that fundamentals such as new work and employment had begun to moderate at the end of 2017.
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Analysts suggest that the ongoing uncertainty facing firms is likely to have dragged on these areas.
Chris Williamson, Chief Business Economist at IHS Markit said: “Digging into the details behind the resilient strength signalled by the headline numbers, the survey data reveals an economy that is beset with uncertainty about the outlook, which is in turn dampening business spending and investment.”
“Trends in hiring and business investment in fixed assets such as offices are showing signs of deteriorating, as is expenditure on IT, computing and other business services as worries about Brexit.”
The Eurozone also published its latest composite PMI figures this morning, with the data confirming that the bloc’s private sector expanded at its fastest pace since 2011 in December.
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The survey data reveals an economy that is beset with uncertainty about the outlook
This capped off a solid year for the Eurozone, with 2017 seeing the economic area outperform expectations across the board.
Forecasts from analysts suggesting that Eurozone GDP is likely to have accelerated by 0.8 per cent in the fourth quarter.
Looking ahead, the GBP/EUR exchange rate may be pressed lower on Friday with the publication of Germany’s latest retail sales figures.
Economists are forecasting that sales growth will have rebounded from -1.2 per cent to 1.1 per cent in November.
However, the euro may be quickly forced to relinquish any early gains as the Eurozone will also release its latest CPI flash reading.
The reading is expected to show that inflation slipped from 1.5 per cent to 1.4 per cent last month.
Meanwhile, the pound may be lifted by the release of the UK’s latest labour cost figures, with another uptick in costs in the third quarter likely to place more pressure on the Bank of England (BoE) to raise interest rates.
