The GBP EUR exchange rate was -0.50% lower on Monday after PMI data for the UK and Eurozone favoured the euro hitting the 1.2000 resistance. Cost pressures are hitting the British economy and it was the same for the euro, but January has seen improvement for Germany. Ministers are awaiting the fate of Boris Johnson with the Sue Gray report due in the next few days.
The GBP to EUR is trading at 1.1885 and we warned in Friday’s report that there is a risk of a slip to 1.1700 if the pound saw weakness.
UK business outlook darkens with inflation
British business activity was seen dropping to an 11-month low with cost pressures staying elevated, according to the Markit PMI data.
The IHS Markit/CIPS Composite Purchasing Managers Index slipped in January to 53.4 from 53.6. A poll of economists had expected a reading of 55 after recent numbers.
In Germany, it was the opposite effect with analysts expecting a reading below the 50 level that separates contraction from expansion. The German data jumped to 54.3 with Europe’s largest economy seen improving.
The spread of the latest coronavirus variant hit consumer-focused firms and manufacturers said that orders in the UK grew at the weakest pace for a year, although business and financial services companies saw a faster 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 continue to drag on with no real conclusion. In a statement afterwards, Sefcovic said that with “goodwill” a solution was still possible.
Boris Johnson resignation ‘inevitable,’ says Kerr
Boris Johnson’s resignation is “inevitable”, Conservative MSP Stephen Kerr has warned as the Prime Minister faces further pressure.
Kerr told BBC Scotland: “I think the longer it takes for the Sue Gray report to come out, the more detail there’s going to be in it, the more investigation that will have taken place.”
“I think there’s an inevitability to what happens next and it gives me, as you can imagine, no joy whatsoever about a Conservative Prime Minister having to leave office, but I think that is where this ends up.”
Meanwhile, Lord Agnew, the minister responsible for efficiency has dramatically resigned, saying he was unable to defend the way the government handled fraudulent Covid business loans.
“Given that I am the minister for counter-fraud, it would be somewhat dishonest to stay on in that role if I am incapable of doing it properly,” he told the Lords.
“It is for this reason that I have sadly decided to tender my resignation as a minister across the Treasury and Cabinet Office with immediate effect.”
The resignation is another piece of drama in a week that could see the British pound rocked by the Prime Minister’s resignation.
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