EUR GBP Back Above 0.8400 as UK PMI Data Disappoints

The EURGBP exchange rate saw a strong 0.50% gain on Monday after the German economy caught up with the UK in the latest PMI data. The UK was expected to show a 55 number, but the actual result was a slip to the 53.4 level.

The EUR to GBP rate was trading at 0.8410 as the pair looks to make a move back towards the 0.8600 level.

UK business outlook slows with virus and price pressures

The UK’s business activity was seen dropping to 11-month lows due to cost pressures staying elevated, according to the Markit PMI data.

The IHS Markit/CIPS Composite Purchasing Managers Index dropped in January to 53.4 from 53.6, with a poll of economists expecting a reading of 55.

In Germany, the situation improved as analysts had expected a reading below the 50 level that separates contraction from expansion. The German data jumped to 54.3 as Europe’s largest economy caught up with the UK.

The spread of Omicron was a blow to consumer-focused firms and manufacturers said that orders had grown at the weakest pace for a year, although business and financial services companies saw an expansion. The flash PMI data suggested a similar level of economic performance for Britain, Germany and France.

“All told, this PMI survey suggests that the UK economy is suffering a hangover from the surge in Omicron cases. Even so, we still think GDP will recover fairly swiftly over the rest of Q1,” said Adam Hoyes, economist at Capital Economics.

The UK’s talks with Europe over Northern Ireland are still in the balance, although the EU’s Marcos Sefcovic said that a “goodwill” solution was still possible.

WHO warns of more European virus surges

A World Health Organisation chief has said that Europe is “only passing the halfway mark” of the pandemic and that Covid should not be likened to flu.

The WHO says governments “should not suggest to people that the data has suddenly changed, or the virus has suddenly got incredibly weak,” which the UK ministers have implied in recent days as they dropped all restrictions.

Dr David Nabarro, the WHO’s special envoy for the coronavirus, said that the “end was in sight” but said that Europe was only “passing the halfway mark in a marathon”.

Asked about the recent suggestion that the virus will become endemic, Nabarro told Sky News: “I keep wondering what the people who make these amazing predictions know that I and my colleagues in the World Health Organisation don’t know.”

Meanwhile, Boris Johnson has warned that “gloomy” intelligence suggested Russia was planning a lightning raid on Kiev as British staff and their families were being evacuated from the Ukrainian capital.

Johnson warned President Vladimir Putin that a move into Ukraine would be a “disastrous step” which could see Russia involved in a bloody and protracted conflict.

Mr Johnson said he did not believe war was inevitable and there was a chance that “sense can still prevail”.

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Source: https://www.eurorateforecast.com/2022/01/eur-gbp-back-above-0-8400-as-uk-pmi-data-disappoints/