Key Moments
- EUR/GBP traded around 0.8725 on Wednesday, down 0.10% as Pound Sterling stayed supported by expectations of tighter UK monetary policy.
- Eurozone HCOB Manufacturing PMI for March was revised up to 51.6, the strongest level in 44 months, with gains led by Germany and Italy.
- Preliminary Eurozone annual inflation for March came in below expectations, while the Bank of England signaled a possible rate hike as early as April.
EUR/GBP Slips as UK Policy Expectations Dominate
EUR/GBP was trading near 0.8725 on Wednesday, lower by 0.10% on the day at the time of writing. The cross edged down as Pound Sterling (GBP) remained underpinned by expectations of tighter monetary policy in the United Kingdom, limiting upside for the Euro (EUR) despite firmer economic indicators out of the Eurozone.
Market focus stayed on inflation dynamics and the likely paths of central bank policies against a backdrop of ongoing geopolitical tensions.
Eurozone Manufacturing PMI Hits Multi-Year High
Revised data showed the Eurozone’s HCOB Manufacturing Purchasing Managers Index (PMI) rising to 51.6 in March, up from the preliminary reading of 51.4 and above the 50.8 level recorded in February. This final figure represented the sector’s strongest performance in 44 months and pointed to a gradual recovery in industrial activity across the currency bloc.
The upward revision was largely driven by stronger momentum in Germany and Italy. By contrast, France’s manufacturing sector was revised lower to stagnation, while Spain unexpectedly registered a contraction in manufacturing activity. The mixed country-level performance underscored the uneven nature of the recovery among the Eurozone’s major economies.
Softer Eurozone Inflation and Geopolitical Backdrop
The Eurozone’s preliminary annual inflation figures released on Tuesday showed that March price growth undershot expectations, even with geopolitical tensions tied to the conflict with Iran. This weaker-than-anticipated inflation reading provided additional support to the Euro, as investors assessed that the economic fallout from the conflict could remain contained and potentially short-lived.
BoE Rate Hike Signals Support Pound Sterling
On the UK side, Pound Sterling continued to find support after the Bank of England (BoE) indicated that a rate increase could be considered as early as April, amid inflation risks linked to tensions in the Middle East. These policy expectations have helped restrain further gains in EUR/GBP.
However, UK macroeconomic data have shown a more mixed picture. The S&P Global Manufacturing PMI for the United Kingdom slipped to 51 in March from 51.4 previously, falling short of market expectations of 51.2 and signaling a modest slowdown in the pace of manufacturing sector growth.
Euro Performance Against Major Currencies
The table below presents the percentage change of the Euro (EUR) versus major currencies for the day. According to this snapshot, the Euro showed its strongest performance against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | – | -0.24% | -0.38% | -0.03% | -0.15% | -0.53% | -0.29% | -0.66% |
| EUR | 0.24% | – | -0.14% | 0.22% | 0.09% | -0.28% | -0.04% | -0.42% |
| GBP | 0.38% | 0.14% | – | 0.36% | 0.24% | -0.14% | 0.12% | -0.26% |
| JPY | 0.03% | -0.22% | -0.36% | – | -0.11% | -0.46% | -0.25% | -0.59% |
| CAD | 0.15% | -0.09% | -0.24% | 0.11% | – | -0.36% | -0.13% | -0.50% |
| AUD | 0.53% | 0.28% | 0.14% | 0.46% | 0.36% | – | 0.26% | -0.12% |
| NZD | 0.29% | 0.04% | -0.12% | 0.25% | 0.13% | -0.26% | – | -0.37% |
| CHF | 0.66% | 0.42% | 0.26% | 0.59% | 0.50% | 0.12% | 0.37% | – |
The heat map illustrates percentage moves of major currencies against one another. The base currency is selected from the left column, while the quote currency is taken from the top row. For instance, if the Euro is chosen from the left column and the US Dollar from the top row, the value shown represents EUR (base)/USD (quote).
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