If you’re looking for Euro predictions, it may interest you to know that the UK services PMI has risen to a nine-month high, with a reading of 51.4 in July. This moves up from the previous reading of 50.2 and beats the market forecast of 50.3. Importantly, the figure remained above the key level of 50, unlike recent manufacturing and construction data, which have both recorded readings below.
A reading above 50 represents expansion and below 50, contraction. Hence, with roughly 80% of the UK economy based on the services sector, this data provided a welcome boost for the Pound. The GBPEUR interbank exchange rate almost touched 1.09, at 1.0899.
Despite stronger than expected data, the UK economy remains firmly under pressure, with the GBPEUR interbank market trading close to a two-year low. There’s no doubt that the main driver behind future movement will be Brexit.
Thus far, Prime Minister Boris Johnson has refused to meet with his EU counterparts, until they remove the Irish backstop from the Brexit Withdrawal Agreement, something the EU has ruled out. Instead, Boris has ramped up preparation for a ‘no deal’, by making a further £2.1 billion available.
Pound v Euro forecast
It is understood that Boris Johnson sees the chance of the UK leaving the EU without a deal as extremely small. However, with Boris’ firm lines in stark contrast to those of the EU, it’s difficult to see a compromise.
Michel Barnier, the EU’s Chief Brexit Negotiator, has been hugely critical of Boris’ aggressive approach. Mr. Barnier has reinforced that the EU will not move on the issue of the backstop, drastically increasing the odds of a ‘no deal’ Brexit.
With UK MPs on their six-week summer recess, Parliament will not reconvene until Tuesday 3rd September. This gives very little time before the UK officially leaves the EU on 31 October, so markets are expected to remain volatile.
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