The GBP EUR exchange rate was lower by -0.18% on Tuesday after the release of European PMI figures showed an improvement in the Italian number, while other nations held up. The pound sterling is retreating as traders scale back their aggressive rate hike bets of recent weeks.
The GBP to EUR was trading at 1.1750 after slipping from yearly highs at 1.1900 recently.
Supply chain issues still dampening euro outlook
Eurozone manufacturing held up last month but was hurt by supply chain bottlenecks and logistical problems, a survey showed on Tuesday.
Ongoing disruptions from the coronavirus pandemic, alongside a shortage of HGV drivers, has caused production shortages and left factories struggling for raw materials.
IHS Markit’s final manufacturing Purchasing Managers’ Index (PMI) dropped to an eight-month low of 58.3 in October from September’s 58.6, just lower than the 58.5 “flash” estimate but still comfortably above the 50-mark separating growth from contraction.
“Overall, the demand side continues to be very strong so that’s a positive sign,” said Bert Colijn at ING.
“But input shortages and transportation problems are continuing to hurt the manufacturing sector and those issues appear to be here to stay for the foreseeable future.”
Europe’s largest economy, Germany also struggled with these issues as it relies on manufacturing and Phil Smith at IHS said:
“Worryingly, the supply problems took a turn for the worse in October, with lead times on purchases lengthening to the greatest extent for three months,” he said as cost inflation has crept higher.
UK virus cases drop 14%, Sunak warned on climate largesse
The UK recorded over 40,000 new daily coronavirus cases on Monday, which is a 14% drop from the 46,500 recorded a week earlier. Previous forecasts said that cases could drop to around 5,000 by Christmas in the country and calls from Labour and the Liberal Democrats for the plan B measures two weeks ago were wide of the mark.
Elsewhere Chancellor Rishi Sunak has been grilled on the climate promises that he and Boris Johnson are undertaking.
The DUP’s Sammy Wilson branded the Cop26 summit a “climate circus” before warning the Chancellor about the “huge costs” of the planned net-zero strategy.
Mr Wilson said: “Given the commitments which the Prime Minister is making at the climate circus in Glasgow this week, how can the Chancellor possibly say that public finances will be managed effectively when the huge costs of net zero are not even published by the Treasury, let alone known by the public, and we are already seeing taxes increasing to pay for the huge infrastructure changes which reaching net zero are going to entail?”
JP Morgan recently estimated that the transition will require as much as $150 trillion of investment over the next 30 years, including £1.4 trillion in the UK.
Sunak said government was ‘mindful’ of the costs but added: “The net-zero strategy… sets out a comprehensive approach to transitioning backed up with £30 billion of investment”.
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