Pound euro exchange rate (GBP) SURGES - Thanks to the UK Services Sector
Monday's Coverage Commences Here: The outlook has certainly improved for the UK currency; this morning we have received fresh confirmation that the UK economic recovery remains robust.
The British pound to euro exchange rate (GBP/EUR) advanced 0.12 pct to reach 1.1819 by mid-morning following the release of better than expected Construction PMI data.
October's Construction PMI came in at 59.4. Analysts had predicted 58.9; better than last month's 58.9.
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Momentum wanes for Euro
So while Sterling has benefited from strong UK data, we note the fortunes of the shared currency are headed in the opposite direction.
"The confirmation of the final PMI reading for the eurozone today at 51.3 is unlikely to change the recently developed negative picture for the EUR. Momentum has waned significantly and US yields have risen by 10bp in three days, providing further tailwinds for the US dollar," says a note from UniCredit Bank.
UniCredit make mention of the euro dollar exchange rate - as always it is important to watch this headline pair for insight into the euro pound exchange rate.
Losses could continue for the euro
Turning to the outlook for the euro and the pound, Lloyds Bank Research warn of further weakness for the EUR:
"EUR underperformance looks set to continue in the run up to Thursday’s ECB meeting. Last week, the October CPI 'flash' estimate came in much weaker than expected.
"This prompted the market to price in the risk of further monetary easing from the ECB, with a number of market economists calling for a rate cut as early as this week or in December."
ECB’s Constancio and Asmussen speak this morning; their comments are likely to be closely watched as the market looks for any indication on how the ECB is likely to act.
Central bank policy could be key
Currency Index meanwhile look beyond the PMI data releases due at the start of the week and focus on the importance of central bank policy changes:
"Deeper into the week, Thursday proves to be a day of great interest on the markets with a raft of data set for release. The Bank of England announces its monetary policy decision on Thursday with no change to policy being expected from the BoE.
"The Bank of England is holding the ground with Mark Carney unlikely to hinder the process with change until the growth in the job sector.
"Still our European counterparts release its monetary decision on the same day, Draghi as always expected to show a clam but cautious tone on the Eurozone recovery."