Services PMI causes Sterling spike against the Euro (Daniel Johnson)

Eurozone PMI data arrives below expectations

Services Purchase Mangers Index (PMI) was released yesterday in the UK and the Eurozone. Services PMI is a measure of health in the sector and can move markets. The UK saw a fall of 0.3% and saw a slight rise in German data by 0.1%. Italian PMI came in 0.4% down and French PMI was also down by 0.6%. This caused GBP/EUR to move above 1.09, the best levels for Euro buyers for over two weeks.

I am of the opinion this could be a small window of opportunity. Citibank, J.P Morgan, Morgan Stanley and HSBC are all predicting parity on GBP/EUR by the end of the year. Sterling is going to find it particularly hard to make any significant gains due to political uncertainty and a lack of clarity on Brexit.

Political uncertainty historically weakens the currency in question. With a growing number of conservatives pushing forward a vote of no confidence in Theresa May the pound stays anchored below 1.10. Until we have a stable government the pound stands little chance of a sustained rally.

There needs to be clarity on the UK’s stance on Brexit. The white paper documents that are being released are not addressing the main points on immigration and trade. In the currency market no news is worse than bad news. These points need to be addressed if investors are to regain confidence in the UK economy.

Could we see QE tapering from the ECB?

With sustained growth geographically and in the majority of business sectors in the Eurozone there has been talk of tapering Quantitative Easing (QE) from the European Central Bank (ECB). QE is pumping money into an economy to stimulate growth. The ECB are currently injecting €60bn a month, if this is reduced to €40bn we could see GBP/EUR fall below 1.05. This may not be a wise move as if the Euro becomes too strong it could hinder exports and damage the Eurozone economy.

If you have a currency requirement I would be happy to assist. You need to have an experienced broker on board in order to take advantage of rates when a brief spike occurs, especially in the current climate. If you have a currency provider already in place I am prepared to perform a comparison against them. It will take minutes and could potentially save you hundreds or even thousands of pounds. I can be contacted at  dcj@currencies.co.uk.

 

For more news on foreign exchange rates and to request a free no-obligation quote visit www.currencies.co.uk