German manufacturing slumped into contraction for the first time since 2016 as decreasing demand took its toll on orders, although the corresponding service sector revealed a surprise uptick in activity.
French Markit services PMI for January fell well below expectations to 47.5 – the weakest in over four years – meaning the sector has entered contraction territory.
With decreasing demand and continuing pressure from the Yellow Vests protestors, the French economy has suffered, leaving many euro investors feeling anxious.
Chris Williamson, an economist at IHS Markit, commented: “Firms are wondering what does 2019 hold in terms of growth. It looks like it’s going to be a tough year. There is a lot of hunkering down, a lot of cost controls and weakening expectations about the year.”
Later on today we will see the European Central Bank (ECB) announce its latest interest rate decision, although rates are expected to remain at 0 per cent.
Any dovish comments from Mario Draghi at the following ECB press conference could see the pound to euro exchange rate increase.
There is a lack of important UK economic data releases today, meaning Eurozone developments will likely drive movement in the GBP/EUR pairing.
Brexit debates, however, are heating up as Theresa May continues to drum up Parliamentary support for her ‘Plan B’.
Michel Barnier, the EU’s Chief Brexit Negotiator, has warned against manoeuvres, such as those made by Labour MP Yvette Cooper, to block the government from delivering a no-deal Brexit.
Mr Barnier said: “There appears to be a majority in the Commons to oppose a no-deal but opposing a no-deal will not stop a no-deal from happening at the end of March. . . To stop no deal, a positive majority for another solution will need to emerge.”
The pound euro exchange rate is likely to be driven by political forces this week, with Theresa May due to face a vote on her Brexit ‘Plan B’ next week, and with increasing divisions within Parliament and pressures from the EU, it is increasingly probable that the GBP/EUR exchange rate will tumble.