GBP/EUR Exchange Rate: GBP-to-EUR Sails Towards 1.18, Debate over Bank of England Policy Tipped to Heat Up

A look at the foreign exchange markets on Monday morning in London shows the Pound to Euro exchange rate is 0.54 pct higher on a day-to-day basis; 1 GBP converts to 1.1789 EUR.
The Euro to Pound exchange rate is thus quoted at 0.8482.

NB: The above are spot market quotes, your bank will subtract their own spread when passing their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please learn more here, or use our custom wholesale vs retail currency converter.

Sterling surges as Manufacturing PMI beats expectations

Ahead of today's data release we hear from one prominent analyst that after a strong August, the risk to September's data was to the downside (see @ 08:16 on our daily coverage feed).

A massive beat by Markit UK Manufacturing PMI data: Actual = 57.2, expectations were for 55, last month = 54.8.

The Pound Sterling has shot higher in response.

Jeremy Cook at WorldFirst on the repercussions of today's strong PMI release:

"We have started this week with a positive tone as the purchasing managers index for the manufacturing sector beat expectations surging to their highest level in three years.

"This will no doubt spark further debate around Bank of England policy and was followed by a quarterly survey by BDO that suggests the UK’s recovery may be more broad-based than consumer-led growth based on households running down savings, with investment growth also picking up."

Good news for Eurozone as factories see orders pick up again

The strength of the Pound to Euro rally on Monday morning suggests that the UK has outshone Europe in the data stakes.

Nevertheless, readings out of the Eurozone has been helpful to EUR:

The Markit Manufacturing Purchasing Managers' Index (PMI) came in at 51.4 in August, compared to 50.3 in July. Analysts had expected 51.3, so the beat was not as eye-opening as that of the UK.

Markit's senior economist Rob Dobson said that unlike in previous months, the data was not driven solely by Germany, with the manufacturing sectors in other countries also posting growth.

"We shouldn't take away from this number the fact that it's a 26-month high. The longest journey towards recovery starts with the smallest step," says Dobson in an interview with CNBC.

"What we've seen in the last couple of months - euro zone manufacturing expanding in both of these months - those are the first steps, hopefully, towards a more sustainable recovery."

A new week starts in positive fashion

The week started with improved sentiment after a geopolitically quiet weekend.

The tensions regarding Syria eased as the US President Obama is now waiting for the Congressional approval to attack Syria and the Congress will not meet before September 9th. This means a week of breather both on political and financial decks.

The 10-year US government bond yield closed the week above 2.75%, the majority of Asian stock markets traded in the green.