In the wake of a trio of better-than-expected October PMIs the mood towards the Pound has improved, benefitting from continued signs of resilience within the UK economy.
As signs point towards the domestic economy having started the fourth quarter on a stronger footing this encouraged demand for Sterling, even as Brexit-based uncertainty persists.
The initial negative impact of the Bank of England’s (BoE) less hawkish meeting minutes also started to fade at the start of the week, with policymakers still looking on course to raise interest rates again in the coming year.
However, with fresh UK data rather thin on the ground this week the Pound Euro exchange rate could struggle to hold onto a stronger footing for long.
Friday’s raft of trade and production data could put a dampener on the mood towards Sterling, meanwhile, with any signs of weakness likely to be greeted with dismay.
On the other hand, if the NIESR gross domestic product estimate for the three months to October proves encouraging this could see GBP exchange rates rallying once again.
So long as economic growth continued to pick up investors are likely to pile into the Pound, with a strong showing offering the BoE vindication for its choice to raise interest rates at its November policy meeting.
Disappointing Eurozone Services PMIs Limit Euro Demand
The Euro struggled to gain any particular traction against its rival on Monday thanks to a mixed raft of Eurozone services PMIs.
While sector growth across the currency union remained relatively strong markets were still disappointed to find that the Italian, Spanish and German figures had all fallen short of forecast.
Even so, as Phil Smith, Principal Economist at IHS Markit noted:
‘The manufacturing sector may be the star-performer right now, but services also continues to move along nicely and looks set for a solid fourth quarter performance.’
As the underlying health of the Eurozone economy remains robust the downside potential of the Euro was still limited, preventing the GBP EUR exchange rate from making any significant gains at this juncture.
Commentary from various European Central Bank (ECB) policymakers could prompt further volatility for the single currency in the days ahead, as markets still hope to see signs that the mood is turning more hawkish.
Any indications that the ECB could shift towards a greater monetary tightening bias sooner rather than later may give the Euro a boost against its rivals.
However, if President Mario Draghi maintains a distinctly dovish stance then the GBP EUR exchange rate is likely to remain well supported in the near term.
Current GBP EUR Interbank Exchange Rates
At the time of writing, the Pound Euro exchange rate was trending higher around 1.1293. Meanwhile, the Euro Pound exchange rate was trending lower in the region of 0.8854.
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