This morning’s Construction PMI release has yet again proven that the UK remains resilient to June’s vote, boasting a .6 gain above expectations and hitting an 8-month high on the index. The news was welcomed by the markets and the Pound has seen further gains against its counterparts, gaining over half a cent against the Euro.
Rising import prices remain a concern for the sector, coupled with higher inflation and a cheaper Pound, the prospect of Brexit may begin to find its way into the economy in 2017.
David Noble, chief executive at CIPS, has warned that the weaker Pound was felt in November, with cost inflation the highest since early 2011.
Pound to Euro exchange rates remain up at the start of December, compared with the lows of November (1.10) with the focus now on the Italian Referendum on Sunday.
Best time to buy Euros in 3 months
Further gains for Pound to Euro exchange rates could present themselves next week, with expectations for the Euro to come under pressure following the Italian Referendum on Sunday. Furthermore, Euro GDP estimates for Q3 and the ECB’s interest rate and consecutive monetary policy update is expected to rattle markets.
With inflation still a concern for Mario Draghi, further hints towards an extension of their current QE programme could be announced which could provide added support for Pound Sterling.
The ECB face further challenges if Italy reject banking re-structuring, with 8 Italian banks at risk of collapse and Prime Minister Matteo Renzi’s reputation in jeopardy.
Quiet week for Sterling
Much of the GBP/EUR movements will arise from Euro uncertainty with the only noticeable release for the UK in the form of GDP estimates from the NIESR. The report will look to predict the outlook for the next 3 months in the UK, and if positive, could provide further comfort for Sterling investors. The UK economy remains resilient to the Brexit vote for now which could present further strength next week.
With Theresa May set to invoke Article 50 by March, Pound exchange rates could quickly reverse from their current highs.