- Pound (GBP) holds yesterday’s gains, BoE’s Haldane forecasts 20% GDP in Q3
- UK Manufacturing PMI to confirm 54.3
- Euro (EUR) slipped over inflation concerns
- German manufacturing PMI due to confirm 56.6
The Pound Euro (GBP/EUR) exchange rate is treading water after strong gains in the previous session. The pair surged 0.7% higher on Wednesday, settling at €1.1020, approximately the high of the day. At 05:15 UTC, GBP/EUR trades just a few pips lower.
UK GDP for the second quarter was finalised at -19.8% contraction. This was a very slight improvement on the -20.4% originally forecast in the period when lockdown measures were in full force. The contraction was the biggest ever recorded.
Bank of England’s chief economist Andy Haldane, however, sounded much more upbeat than his peers when he spoke at an online event on Wednesday. He said that the economy faces an “unholy trinity” of risks from rising covid cases. However, he also predicted a 20% growth in Q3.
That said recent rebound appears to be fading and with tighter lockdown restrictions coming into force almost daily in the UK and unemployment rising, the economic rebound could stall in the final quarter of the year. Bank of England Governor Andrew Bailey forecast 7.5% unemployment by Christmas.
Attention will now turn to the manufacturing PMI for September. The reading is expected to confirm the initial PMI of 54.3. A strong reading could help boost the Pound. Broadly speaking manufacturing sectors have been recovering better than service sectors from the lockdown hit.
The Euro fell sharply lower in the previous session after European Central Bank President Christine Lagarde warned that low inflation could prove to be a headache for the central bank. Inflation in August moved into negative territory. This month, inflation which is due to be released on Friday, is also expected to show disinflation and at a deeper rate.
Today all eyes will be on the manufacturing PMI figures. A strong reading from Germany at 56.6 is expected, after the solid retail sales reported in August.
