GBP EUR Exchange Rate Tumbles as UK Manufacturing PMI Disappoints

The GBP EUR exchange rate tumbled by around half a cent in trading on Monday as markets reacted poorly to an unexpected drop in the UK’s latest Manufacturing PMI.

Pound Euro (GBP EUR) Slides as UK Factory Growth Slows

The Pound Euro (GBP EUR) exchange rate ceded ground during today’s session as the UK’s latest Manufacturing PMI reported that activity slowed for the third consecutive month in March.

According to data compiled by analytics firm IHS Markit, UK manufacturing slowed from 54.4 to 54.2 last month, disappointing investors who had expected activity to rise to 55.1 and prompting further concerns that the sector may struggle in 2017.

The report suggested that UK firms are being increasingly pressured by the low value of the Pound as prices for raw materials continue to rise.

This in turn has prompted consumer consumption to fall as companies are forced to pass these increased costs onto buyers.

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply said;

‘The reduced buying power of the Pound has led to the 11th consecutive rise in input costs with consumers feeling the effects in the form of higher prices on the high street.’

However while output and new order growth showed a marked decline, market sentiment was lifted slightly as the sector showed that the pace of job creation increased to its highest levels in over a year.

Euro Bolstered by Upbeat Economic Data

The Euro was strengthened today by the release of its own Manufacturing PMI as the Eurozone continued to show solid growth in March.

Factories in the bloc put in a strong performance last month as the overall Eurozone reading surged from 55.4 to 56.2, being strengthened by robust data from Germany, France and Italy, with Italian manufacturers defying expectations as activity jumped from 55 to 55.7 after forecasts it would slow to 54.7.

However the uptick in manufacturing brought its own set of problems as factory demand outstripped supply. As Chris Williamson, chief business economist at IHS Markit explained.

‘The survey is signalling the highest incidence of supplier delivery delays for nearly six years, underscoring how suppliers are struggling to meet surging demand.’

The single currency was also strengthened by the Eurozone’s latest jobless figures as the Unemployment rate fell from 9.6% to 9.5% in February, its lowest level in nearly eight years and signalling to EUR investors that the Eurozone’s economic recovery continued at the start of 2017.

GBP EUR Exchange Rate Forecast: UK Construction PMI Ahead

The Pound may cede further ground on Tuesday following the release of UK’s latest Construction PMI, with economists forecasting that the sector will have struggled in March as it continues to be pressured by the high cost of importing materials.

Meanwhile the Euro may push higher again tomorrow as Eurozone Retail Sales are predicted to have recovered from a 0.1% contraction in January, with retailers expected to report that sales grew 0.5% in February.

Current Interbank Exchange Rates

At the time of writing the GBP EUR exchange rate was trending around 1.17 and the EUR GBP exchange rate was trending around 0.85.