Pound Euro (GBP/EUR) Exchange Rate Rises as UK Construction Shows Signs of Recovery

December 3, 2019 – Written by John Cameron

Pound Sterling Euro (GBP/EUR) Exchange Rate Rallies as UK Construction Downturn Eases

The Pound Sterling Euro (GBP/EUR) exchange rate rose on Tuesday following the release of UK construction data. The pairing is currently trading at around €1.1728.

Sterling edged up today as the pace of decline in the UK construction sector eased in November.

However, the UK construction PMI remained firmly in contraction territory, edging up slightly to 45.3 in November. This month’s reading was a long way from growth as both UK election uncertainty and Brexit pessimism weighed on the sector.

Markit also showed prospects for a recovery remained under pressure as new orders suffered a sharp drop.

Companies remained cautious about the future and business optimism remained below the long-run average.

Commenting on this morning’s data, Markit’s Economics Associate Director, Tim Moore said:

‘UK construction output fell again in November as Brexit uncertainty and the forthcoming General Election continued to send a chill breeze across the sector. The speed of the downturn in construction work eased a little since October, but the survey continues to signal a notable drop-off in business conditions compared with the first half of 2019.’

However, this could do little to stop the pairing rising as the Conservatives extended their lead in the polls and US-EU trade tensions increased.

President Trump’s Proposed Tariffs on French Goods Sends the Euro (EUR) Lower

The single currency fell against Sterling as US-EU trade tensions and threats of further tariffs on EU goods weighed on the currency.

Overnight, US President Donald Trump proposed a round of new tariffs on $ 2.4 billion French goods.

Various products such as Champagne, cheese, and handbags could be hit with up to 100% tariffs after the US stated France’s digital service tax was harming US companies.

Further pressure came from US Trade Representative Robert Lighthizer who stated Washington was also deciding whether or not to open up further investigations.

If the US decided to look into similar digital service taxes in Austria, Italy and Turkey the Euro could fall further.

Speaking about this, Lighthizer stated:

‘[The move] sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies.

‘‘The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies.’

Sterling (GBP) Rallies as Tory Party Lead Widens

On Tuesday, the Pound received a boost from the latest UK election opinion poll which revealed the Conservatives extended their lead over Labour.

In Kantar’s poll, data showed Boris Johnson’s Tory Party increased its lead over Jeremy Corbyn’s Labour party by 12 points.

This provided Sterling with an upswing of support as this increases the likelihood of a Conservative majority in next week’s election.

Markets believe a win for Boris Johnson would mean an end to the ongoing Brexit uncertainty and further polls indicating this will likely buoy GBP.

Pound Euro Outlook: Will Weak Services PMI Data Weigh on GBP?

Looking ahead to Tuesday, the Euro (EUR) could edge up slightly against the Pound (GBP) following the release of the bloc’s services PMI.

If the Eurozone’s service sector expands by more than expected in November, it could buoy the single currency.

Meanwhile, Sterling could slump further following the release of the highly anticipated services PMI.

If data shows the UK service sector has plummeted further into contraction than expected, the Pound Euro (GBP/EUR) exchange rate will fall.

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TAGS: Pound Euro Forecasts