The Pound Euro (GBP/EUR) exchange rate is on the defensive this morning as markets react to the UK’s abysmal construction PMI.
At the time of writing, the GBP/EUR exchange rate is down roughly 0.3% from this morning’s opening levels with the pairing trading at around €1.1156.
Pound (GBP) Slumps on ‘Dreadful’ Construction PMI
The Pound (GBP) is in full retreat against the Euro (EUR) and the majority of its other peers this morning, following the publication of an atrocious construction PMI.
According to data published by IHS Markit, the UK’s construction sector suffered its worst slump in a decade last month, with the index plummeting from 48.6 to 43.1 in June, falling well below expectations of a modest rise to 49.3.
The collapse in growth was blamed on delays to new commercial projects due to increasingly risk adverse clients unwilling to commit to the UK in light of heightened political and economic uncertainty, indicating that Brexit continues to drag on the UK economy.
Sam Cooper, vice-president of Market Risk Solutions at Silicon Valley Bank, said:
‘The extremely disappointing construction PMI reading is further evidence that Brexit concerns are manifesting in economic data.
‘Sterling’s attraction continues to diminish as weak economic data paired with political uncertainty weigh on the value of the currency.’
It also now looks increasingly likely that the UK economy will have stagnated in the second quarter, the prospect of which is likely to place further pressure on the Pound for the time being.
Euro (EUR) Gains Tempered by EU Indecision
At the same time, the Euro has found its gains against the Pound tempered somewhat this morning by the continued uncertainty looming over the EU as leaders remain deadlocked over who to promote to some of the EU’s top jobs.
After failing to reach an agreement following a marathon summit on Sunday, EU leaders will meet again today as they discus who should take over as European Commission President and a number of other key posts at the top of the EU when they are vacated later this year.
Further limiting the appeal of the Euro was also the publication of Germany’s latest retail sales figures, after the Eurozone’s largest economy suffered a second consecutive contraction in sales growth in May.
GBP/EUR Exchange Rate Forecast: Will the UK’s Service Sector Also Disappoint in June?
Looking ahead, the publication of the UK’s services PMI is likely to be the main catalyst of movement in the Pound Euro (GBP/EUR) exchange rate tomorrow.
This may result in sharp losses in Sterling tomorrow if growth in the UK’s dominate service sector follows the manufacturing and construction sectors into contraction territory last month.
Meanwhile, the focus for EUR investors is likely to turn to the release of the Eurozone’s retail sales figures on Thursday, with the Euro potentially strengthening if sales growth rebounded in line with expectations in May.