GBPEUR Tipped to Challenge 1.17 Once More

Domestic data underpins recent GBP strength

Sterling has so far ignored news that UK BBA Mortgages Approvals missed expectations coming in at 37.2k and not the forecasted 39.2k.

Nevertheless, it would seem the big headline event of the morning has done enough to underpin the August gains achieved by the UK currency.

Pushing the Pound / Euro exchange rate higher at 09:30 was news that Q2 GDP has been revised up to +0.7 pct by the ONS. Initial estimates were for an unchanged reading at +0.6 pct.

Initial reactions from some of the FX houses out there:

Forex.com say, "Two things boosted growth in Q2: a large increase in government spending and fixed capital investment."

WorldFirst say, "Whisper it but that does look like a bit of rebalancing for the UK economy."

WorldFirst are focused on the revision higher to the manufacturing component in GDP from 0.4 pct to 0.7 pct.

Foreign exchange traders will also be taking a positive from the observation that imports increase 2.5 pct in the second quarter but they were outstripped by an increase in exports by 3.6 pct.

The Euro: Eurozone PMI data underlies continued EUR strength

Expect the upside in the Pound to Euro exchange rate to be capped though.

"The PMI releases yesterday morning reflected a euro area that seems to be improving quite nicely. The market didn’t seem to be too fazed by the poor French figure and this was displayed in the falling GBPEUR rate," reports Sasha Nugent at Caxton FX.

The Eurozone PMI Composite index rose to 51.7 from 50.5, its highest level in 2 years.  

This was the first time in 18 months that the service and manufacturing activity expanded, which is a solid confirmation of the Eurozone rising out of recession.

"The numbers look good based on the headline release alone, but not all Eurozone countries enjoyed the same expansion as manufacturing and service sector activity in France continued to contract. Thankfully growth in Italy, Spain and Ireland helped to make up for the difference.  We still need to see additional improvements in PMI to call this a new trend, but the data is moving in the right direction and this has lent support to the euro," says Kathy Lien at BK Asset Management.