Sigh of Relief for the UK as PMIs Work in Favour for GBP as Currency Holds Steady Against the Euro

GBPEUR: Sterling Exchange Rates Sell-off Due to Brexit Concerns

The UK waited with bated breath earlier today as the country saw their flash composite PMIs released at 09:30am. This data release was important to the economy as it would give an indication of the direction the GBP is heading, as well as confirming whether or not the positive labour market data from earlier in the week was a one-off or if the pound sterling really is on course for a post-election rebound. The latter seems to be the case after a rise in their IHS Markit / CIPS composite PMI reading which rose from 49.3 in December to 52.4 in January.

GBP Celebrates Recent Success in Economic Data, Giving a Nod to Post-Election Rebound

GBP celebrated earlier this morning after the release of its IHS Markit / CIPS composite PMI reading which rose from 49.3 in December to 52.4 for January. This rise has supported the currency and has seen it rise to a 16-month high, edging way above the Euro as the trading week closes out. A huge sigh of relief was exhaled from GBP investors as the figure showed above 50 for the PMIs, anything under a 50-point score indicates a contraction. Therefore, with the UK pulling itself out of contraction territory, there is reason to celebrate and build up optimism that perhaps the UK economy is on a rebound. Projections for the figures were expected at 50.5, so the 52.4 reading was met with open arms.

IHS Markit Chief economist Chris Williamson noted that UK output grew at the fastest rate for sixteen months amid rising demand for both manufacturing and services, this suggests that business is indeed rebounding after declines which were evident last year. The sector-specific readings showed that the UK’s services sectors rose to 52.9, which was also a 16-month high, whilst manufacturing rose to a 9-month high of 49.8. Once again, both figures beat expectations with manufacturing expected in at 47.6 and services were predicted to drop to 49.4 after last months stagnation at 50.

Euro Likely to Lose out to Rising GBP/EUR Exchange Rate as It Tackles US-EU Tariff Threats

The GBP’s success will not be celebrated by the Eurozone however, as the GBP/EUR exchange rate is likely to accelerate following the recent support for the GBP. The EU is still underway with trade talks with the US which could cause problems for the currency as President Trump has suggested that the US may impose auto tariffs on the EU if an agreement cannot be made. The EU Trade Commissioner Phil Hogan recently met with US officials in Washington to discuss the deal, during his trip he requested for a reset in the negotiations, suggesting the conclusion if far from near.

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