ALERT: GBP/EUR Surges Higher; GBP/EUR 0.6 pct higher as data beats expectations

The british pound to euro exchange rate (GBP EUR) has shot up following the release of today's Services Sector PMI.

The strength of the rally will force currency traders, commentators and analysts to reconsider their position of the UK currency.

UK Services PMI (October) came in at 62.5 vs 60.0 expected and 60.3 previous.

Consider how negatively many in the currency markets were positioned ahead of the release and you can understand why this is such a positive surprise:

"A lower UK Service PMI is likely to keep cable on offer towards 1.59. 2Y swap differentials remain at 36bp, indicating a correction towards 1.55 in the short term. EUR-GBP could re-approach 0.85," said a note from UniCredit Bank prior to the release.

To put this into perspective, "last time services were that strong in the UK? Tony Blair was still picking out the drapes for No. 10 Downing St," UKForex tell us.

This is an all-time high for this reading.

And now, to understand just how superior the UK recovery is to that of the Eurozone contrast this news to the news that the EU has just lowered  Euro-Zone 2014 growth from 1.2% to 1.1%.

In addition, unemployment has been revised to record at 12.2%

It is only fitting that the British pound to euro exchange rate reflects this scenario.

We would expect the exchange rate to continue moving in favour of GBP from here as such strong moves often establish a fresh trend.

In addition, there are little fresh event risks ahead for the GBP now that we have seen all this month's PMI data released.

The Bank of England MPC decision later this week is tipped to be a non-event.

The same cannot however be said for the ECB decision and press conference.

Analysts are starting to factor in the possibility of a new cut to the refi rate; as such we could expect the Euro to come under further pressure.