The pound climbed higher versus the euro on Tuesday. The pair rallied to a peak of €1.1648 on the back of UK service sector data and a stronger dollar. The pound euro exchange rate closed just short of the high, gaining 0.4% across the day.
Better than expected UK service sector data helped lift the pound in the previous session. A leading industry survey showed a better than forecast view of the UK service sector. The service sector pmi for October printed at 50 in October, up from 49.5 and ahead of analysts forecast of 49.7.
The reading means that the UK has avoided two consecutive months of contraction, which was latest experienced in 2016 following the Brexit referendum. A level of 50 on the index separates expansion from contraction. Whilst pound traders cheered the fact that activity in the service sector is improving, the sector remains stagnant with forward looking indicators also soft. Brexit uncertainty and now political uncertainty with a general election on 12th December have undermined demand and could continue to do so for several more months at the very least.
Today there is no UK economic data to be released. Investors will remain glued to the polls and election headlines. Boris Johnson continues to be firmly ahead in the polls, which is offering support to the pound. As long as Boris wins with a clear majority, the chances of the UK leaving the EU in an orderly fashion on 31st January remain high. This means avoiding a damaging no deal Brexit and avoiding months, possibly years of further Brexit uncertainty which are both bad for the pound.
Will Eurozone Retail Sales Drag Euro Lower?
The euro was out of favour across the board in the previous session. With no eurozone data for investors to digest, the euro dropped as the US dollar rallied. The euro trades inversely to the US dollar. The greenback rallied hard on US — China trade deal optimism and strong US service sector data. As the dollar rallied, the euro tumbled lower.
Today there is plenty of eurozone economic data for euro investors. The most important will be the eurozone service sector figures and retail sales for the bloc. Market participants will be looking to see whether the slowdown in the manufacturing sector is spilling over into the service sector and preventing consumers from spending. Analysts are predicting that retail sales will have increased an unimpressive 0.1% month on month in September. Weak retail sales point to weak future inflation. A soft reading could drag the euro lower.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 GBP = 1.13990 EUR
Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound
Or, if you were looking at it the other way around:
1 EUR = 0.87271 GBP
In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.
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