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GBP/EUR Fails to Capitalise on Extended German Manufacturing Decline

Last week’s high: €1.1355

Last week’s low: €1.1124

Disappointing German Manufacturing PMI Fuels Euro Weakness

Further signs of a German economic slowdown emerged with the publication of September’s manufacturing PMI.

A deeper and unexpected move into contraction territory, with the index sliding from 43.5 to 41.4, fuelled fears for a potential recession in the Eurozone’s powerhouse economy.

The GBP/EUR exchange rate failed to capitalise on this weakness at the heart of the Euro bloc as fresh political turmoil and Brexit chaos weighed heavily on the Pound.

The pressure on Sterling intensified this week as the UK Supreme Court passed an unlawful ruling on Prime Minister Boris Johnson’s proroguing of British parliament, which was immediately followed by disorderly scenes in the House of Commons as agitated MPs resumed their seats the following day.

An unexpected shift to dovish tones from Bank of England (BoE) policymaker Michael Saunders raised the odds of a near-term rate cut and further suppressed GBP exchange rates ahead of the weekend.

Euro Outlook: Weakening German Inflation Set to Add to Single Currency Softness

Confidence in the Euro could fade this afternoon if the German consumer price index shows a decline in September.

Evidence that inflationary pressure within the German economy remains lacklustre would leave EUR exchange rates exposed to selling pressure.

The Pound could still struggle to capitalise on its rival’s deepening weakness as worries over the UK’s own ailing economy persist.

Fresh signs of a slowdown in the latest UK manufacturing and services PMIs could see the GBP/EUR exchange rate shed further ground while developments in parliament are also likely to cause Pound volatility.

Key Events

30th September

13:00   Germany Consumer Price Index

1st October

09:00   Eurozone Finalised Manufacturing PMI

09:30   UK Manufacturing PMI

3rd October

09:30   UK Services PMI

10:00   Eurozone Retail Sales

 

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