The pound is rangebound against the euro this morning, having recouped some early losses on the back of the Eurozone’s latest PMI figures. According to data published by IHS Markit, the Eurozone composite PMI slumped from 52.7 to 51.3 in December, missing expectations it would rise to 52.8 and revealing business growth had slowed to a four-year low. The slowdown was partly attributed to disruptions caused by protests in France, but appeared to be mostly driven by weak underlying growth across the bloc. Analysts are warning that the surveys indicate this softening of growth may carry through into 2019.
POUND LIVE: LATEST GBP STERLING MOVEMENT
Chris Williamson, Chief Business Economist at IHS Markit, said: “Forward-looking indicators such as new orders and future expectations remaining subdued suggest that demand growth is stalling, adding to downside risks to the immediate outlook.”
At the same time, the pound is struggling this morning after Theresa May’s trip to Brussels yesterday failed to secure any concessions from the EU regarding the Irish backstop.
Mrs May appealed to her European counterparts to place a 12-month limit on the backstop agreement in hopes the legal guarantee would help to sell her Brexit deal to MPs back home.
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However, while a couple of leaders appeared open to this request, most seemed unwilling to further negotiate, leading the majority of traders to question whether it would be enough to win over the House of Commons.
European Commission president, Jean-Claude Juncker also urged Mrs May to clarify what she was seeking from the EU.
He said: “Our UK friends need to say what they want, rather than asking what we want.”
Looking ahead to next week’s session, the pound euro exchange rate may enjoy a brief respite from Brexit as the Bank of England (BoE) holds its final policy meeting of the year.
While no policy changes are expected from the BoE this month, the bank’s forward guidance is likely to be closely watched for any hints that policymakers may target another rate hike next year.
A recent pick up in wage growth is likely to support additional hikes from the bank in 2019, but the bank could maintain a cautious outlook given the recent Brexit uncertainty.
In the meantime the release of the eurozone’s latest trade figures may impact the euro at the start of next week, with an expected contraction in the bloc’s trade surplus potentially weighing on the single currency.