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Euro Rates Today at 1-Week High, as UK Services to Stay Slow

Market CommentaryEuro Rates Today at 1-Week High, as UK Services to Stay Slow
Euro Rates Today at 1-Week High, as UK Services to Stay Slow
Euro to The Pound Today.

The euro to the pound interbank exchange rate has hit 0.8657 in the last day, its highest in over one week, or since October 25th.

By comparison, back on November 1st, the Eurozone’s common currency was as weak as 0.86 versus British sterling, so it’s since risen by over 0.5 cents, or by 0.66%.

This may benefit you, because when you transfer money to the UK from the Eurozone, you might get a higher pound total, compared to if you’d exchanged currencies in the last week.

In turn, this could make it more profitable for you, if you’re selling property abroad in Spain or France to repatriate the funds to the UK, or to make regular payments to Great Britain.

To stay up-to-date with the euro to the pound interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, simply select ‘EUR’ (Euro) to ‘GBP’ (Great British Pound.)

Also, to check what’s affecting the value of the common currency versus sterling, go to our EUR to GBP Exchange Rate Updates page. Here, click on the latest article for the most recent news.

One reason why the euro has risen in value versus the pound recently is because it’s forecast that the UK’s dominant services sector contracted again in October, ahead of key data this week.

Another factor why the euro rates today have strengthened is because it’s forecast that the Bank of England may cut its UK economic growth forecasts for 2019/20, at this Thursday’s meeting.

Meanwhile, the euro to the pound interbank exchange rate could be affected, because the European Commission (EC) will release its latest economic growth forecasts this week too.

In addition, looking to the next few weeks, the EUR to GBP interbank exchange rate may be influenced, because the UK will hold a general election on December 12th, which may affect the UK’s future economic and political direction.

Euro to The Pound Today Gains, as UK Services Forecast to Shrink

As I mention, one reason why the euro to the pound interbank exchange rate has hit this one-week high in the past day is because the UK’s vast services sector is forecast to have contracted further in October, ahead of key economic data released this Tuesday 5th November.

UK services make up around 80% of the economy, so it’s the biggest influence on the UK’s economic growth.

To be specific, the UK services PMI (Purchasing Managers’ Index) for last month is forecast at 49.7, ahead of economic watchdog’s IHS Markit’s release tomorrow, reports FX Street.

This would be below the crucial 50.0 figure that separates economic growth from contraction, and follow September’s result of 49.5. If this is accurate, it looks likelier that UK GDP (Gross Domestic Product) may shrink in Q4.

This Tuesday’s UK services PMI release will follow last Friday’s UK manufacturing PMI data, in which it was revealed that British manufacturing activity reached 49.6, above forecasts for 48.1.

However, it’s thought that the UK’s manufacturing output last month was boosted, as factories prepared for the now-obsolete October 31st Brexit deadline, by ramping up stockpiling activities.

By comparison, the UK’s services sector isn’t affected by stockpiling, so it’s thought that this will reveal a clearer picture of the UK’s economic performance in October.

What’s more, given that UK services make up roughly 80% of GDP, we’ll gain a better idea of whether the ongoing Brexit uncertainty is continuing to slow on British businesses, including hiring and investment decisions.

When the UK’s services sector expands faster than forecast, this suggests that the UK’s dominant industry is performing better than the financial markets expect.

In turn, this indicates that UK businesses may be more willing to hire new employees, or buy new equipment, than otherwise thought. In brief, it points to more investment opportunities in the UK, which may affect sterling.

Euro Rates Today May Be Influenced, as BoE May Hold Rates, Cut Growth Outlook

In addition, the euro rates today on the interbank market could also be affected, because this week the Bank of England (BoE) is forecast to hold interest rates at 0.75%.

However, the Old Lady of Threadneedle Street, as the UK’s central bank is also affectionately known, could use this Thursday’s meeting to cut its UK GDP forecasts for 2019/20, in part because of the Brexit uncertainty.

The BoE looks set to maintain UK borrowing costs stable at 0.75% this Thursday. In part, this is because, now that a UK general election has been called for December 12th, it would be highly unusual for the BoE to change monetary policy in the meantime.

This is because, when the great British public is set to go to the ballot boxes, the BoE makes efforts to appear politically neutral.

However, although the BoE could keep UK interest rates stable this week, the central bank may nonetheless reduce its UK GDP growth forecasts for 2019/20, reports BreakingNews.ie.

This is because, first, it’s thought that the continuing lack of Brexit clarity is discouraging firms from hiring and investing. Second, it’s because the USA’s and China’s trade war is depressing economic growth all over the world.

In particular, at the UK central bank’s last meeting, the BoE warned that Brexit uncertainty was now “entrenched”.

With this in mind, Governor Mark Carney and his colleagues on the Monetary Policy Committee (MPC) could cut the UK’s 2020 GDP forecast below its current 1.3%. Some members of the MPC may even signal that UK interest rates need to be cut, to support the economy.

According to Howard Archer, Chief Economic Adviser to the EY ITEM Club, it would be “extremely unusual” for the BoE to cut rates ahead of an election, although there’s a “very real chance” of a reduction next year.

Meanwhile, Raffi Boyadijian, senior analyst at XM.com, says that “the UK economy is struggling” what with Brexit and the US/China trade war. So this may influence sterling.

EUR to GBP Rate Could Be Affected, by Eurozone Retail Sales, Growth Forecasts

Moreover, the euro to the pound interbank exchange rate could also be impacted this week, by key Eurozone economic data.

These includes the common currency bloc’s retail sales for September, due on Wednesday 6th, as well as the European Commission’s updated GDP growth estimates, released on Thursday 7th. We’ll see if these data surprise positively or negatively.

In particular, it’s predicted that Eurozone retail sales fell by 0.6% in September, well below August’s increase of 0.3%. If these figures prove accurate, it would suggest that consumers in the euro area spent considerably less on the high street and online.

Eurozone retail sales contribute significantly to the bloc’s economic growth forecasts, so less spending could potentially bode ill.

Meanwhile, the EC will update its GDP growth estimates this Thursday. At the Commission’s last forecasts in the Summer, it predicted 1.2% growth for 2019, and 1.4% growth in 2020.

However, since then, Germany’s economy has neared recession, while the United States has announced a round of trade tariffs against the EU. So this has the potential to weigh down the EU’s predictions.

It’s worth noting that some of the Eurozone’s latest economic data has been upbeat. For example, the euro bloc expanded by 0.2% in Q3, between July and September, said official statistics agency Eurostat last week, reports Market Watch.

This was ahead of forecasts for a slowdown to 0.1%. Meanwhile, the Eurozone’s unemployment rate was unchanged at 7.5% in September, a joint nine-year low.

UK Opinion Polls Ahead of December 12th Election May Affect Euro Vs Sterling

Lastly, looking to the next few weeks, the euro to the pound interbank exchange rate could also be affected, by the UK’s opinion polls, leading up to the December 12th general election.

This is because the opinion polls guide us as to which political party might form the next UK government. In turn, this could affect the outcome of Brexit, as well as the UK’s future economic direction.

According to latest Opinium poll, the Conservative Party has increased its lead since last week. The Tories now stand at 42%, up from 35% at last week’s poll, and a 16% advantage over Jeremy Corbyn’s Labour Party’s 26%.

Meanwhile, Jo Swinson’s Liberal Democrats’ support is unchanged, at 16%, while Nigel Farage’s insurgent Brexit Party has fallen somewhat, by 2%, to just 9%.

Traditionally, a 10% lead in the opinion polls is enough to grant the winning party a majority of MPs in Parliament, under the UK’s First Past The Post political system.

However, it’s worth noting that the UK’s political landscape has shifted radically in recent years, in part because of Brexit. In particular, at the 2017 general election, the polls forecast that former PM Theresa May would win an ample majority, yet Mrs. May actually lost support.

So until we get the results on December 13th, there’s no telling who’ll form the next government, which may affect sterling.

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or Contact Us.

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