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GBPEUR Sluggish Despite Strong PMI Data

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The GBPEUR exchange rate is -0.06% lower after the Friday morning session, which saw a host of economic data. Weaker consumer confidence and higher government borrowing was countered by strong PMIs and retail sales. Traders are wary about buying into the pound at this level until they see further evidence of a rebound. This is a bit too cautious because the European economy is in a worse position with the ongoing lockdowns and still enjoys a premium from the post-referendum selling.

GBPEUR trades just above 1.1500 and there is little action in the British pound so it may attempt to test last week’s lows into the 1.14 prices.

UK reopening sees a surge in activity

The UK business sector has seen a huge burst of new orders in April as the country moved to lift its virus lockdown restrictions.

The preliminary reading for the UK Composite Purchasing Managers’ Index (PMI) jumped to 60 in April, after a strong reading of 56.4 in March. This marks the highest numbers since November 2013. Economists had been expecting a smaller increase to 58.3, so the UK economy is well on track.

The PMI survey added to other data points that show the UK economy, which dropped by almost 10% in 2020, is heading for a sharp recovery.

The data will also be boosted by the last two weeks of reopening in the ‘non-essential business’ groups and retail sales data was double analysts’ expectations this morning. Data in the Primark earnings also saw that many of the chain’s stores broke their sales records, while the company was able to keep all of their staff in place due to furlough. Both the services and manufacturing sectors increased their staffing this week, according to the PMI survey.

Chris Williamson at IHS Markit said of the survey: “Companies are reporting a surge in demand for both goods and services as the economy opens up from lockdowns and the encouraging vaccine roll-out adds to a brighter outlook”.

“In more than 23 years of PMI history, we have only seen one spell of faster growth than this, recorded between August and November 2013,” he added.

The EU saw its own boost from PMI data with Germany seeing strong results again in the important manufacturing sector, while numbers for the Eurozone countries were promising. The reality however, is that Europe is still dealing with a surge in virus cases and could struggle to catch the UK’s rebound pace.

ECB committed to the bond buying plan

The European Central Bank will stay committed to its bond buying pace as current levels at 28bn euro per month matches that of the pre-virus buying. The bank held rates steady at 0% yesterday and the bank’s President Christine Lagarde has said that it is “premature” to talk about ending stimulus.

The GBPEUR is setting up for further losses next week if sterling can’t see any buyers emerge today. The 1.1280 level was key for the pair last year and could be the target.

The post GBPEUR Sluggish Despite Strong PMI Data appeared first on Pound Sterling Forecast.



Source: https://www.poundsterlingforecast.com/2021/04/gbpeur-sluggish-despite-strong-pmi-data/


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