The single currency started the week on a firm footing as the markets digested the changing fortunes of the European Union vs that of the UK and the USA. Now that Europe’s economy has overtaken the growth rate of the UK and the USA, the Euro has certainly found some short-term favour.
Europe’s Gross Domestic Performance for the 1st quarter of 2016 saw growth of 0.6% whereas the UK could post only 0.4% and the USA a measly 0.1%. The €/US$ rate briefly climbed as high as $1.1616 before giving up ground.
Europe’s economic performance for April was not as awe inspiring, with the composite PMI result covering both manufacturing and services dipping slightly in fortunes to 53.0 in April from 53.1 in March.
Data from the UK was rather horrendous, although sterling moves into the end of the week rather unfazed.
All three Purchasing Managers Index results covering Manufacturing, Construction and Services disappointed this week.
Manufacturing data was released first with April’s PMI falling to the lowest reading since February 2013. The PMI figure came in at 49.2 below the critical breakeven level of 50 which separates growth from contraction. New orders were stagnant over the month and job losses of 20,000 were reported over the last 3 months.
Construction was next to update the following day. It too disappointed the markets with a reading of 52.0 for April down from 54.2 the previous month, representing the weakest growth rate for this sector in almost three years.
The 3rd and final nail in the coffin came from the usually strong services sector. April’s growth rate declined to its lowest level in three years at 52.3 vs 53.7 for March. Overall the series of data paints a very depressing picture of a slowing economy in the UK. Having seen 1st quarter GDP of just 0.4%, the recent PMI’s now suggest that 2nd quarter GDP could show no growth whatsoever, with Brexit fears, slowing global trade, and a lack of inflation all pointing towards a period of economic uncertainty and unease, with consumer confidence now on the slide. The pound currently trades just below €1.27 having traded lower at €1.2580 at the beginning of the week and also having traded higher after climbing to €1.2785 very briefly.
The €/US$ trades at $1.1440 after the US non-farm payroll data release saw another 160,000 jobs added during April, although this was the fewest number of workers added for seven months. The American unemployment rate was unchanged at 5.5%.
For competitive exchange rates, low transfer fees, expert guidance and the special offer of your FIRST TRANSFER FREE call moneycorp on freephone 800 785 011 or visit www.moneycorp.com/algarve
