GBP/EUR: Will UK Service Sector PMI Drag Pound Lower?

Election speculation and better than expected UK data sent the pound soaring versus the euro on Tuesday. The pound euro exchange rate rallied to a high of €1.1749, before easing slightly into the close. The pound euro exchange rate closed 0.4% higher at €1.1728.

With just 9 days to go until the UK general election, the Conservatives are holding a comfortable lead, according to the latest polls. The Labour party have been closing the gap on the Conservatives. The latest YouGov poll show that Labour hold its highest voting share since February.

Despite Labour’s gains, the Conservatives still hold a comfortable majority, with a 10-point lead over Labour. This lead is sufficient to ensure that the Conservative have an overall majority in Parliament, facilitating the approval of Boris Johnson Brexit deal and the UK leaving the EU by 31st January with a deal in place, which is pound positive.

Adding support to the pound was better than forecast construction data. Data showed that the decline in the construction sector eased in November, although the construction pmi remained firmly in contraction territory, edging up to 45.3 in November. This is still a long way from the 50 level which separates expansion from growth as election uncertainty and Brexit pessimism weighed on the sector.

Today investors will look towards the service sector pmi. The service sector is the dominant sector in UK economy, making up around 80% of economic activity. Analysts are expecting the service sector to remain in contraction at 48.6. A weak reading could boost fears off an economic contraction in the fourth quarter just ahead of Brexit. This could drag on demand for the pound.

Will EZ & German Service Sector PMI’s Drag On Euro?

The euro traded broadly flat versus its peers in the previous session, despite better than forecast producer price data (PPI). PPI unexpectedly increased 0.1% month on month in November, this an improvement from the -0.1% decline in October. Stronger PPI is a leading indicator for consumer price inflation.

Today investors will look ahead to the release of the release of the service sector pmi for both Germany and the eurozone. Analysts are expecting activity in the service sector to remain steady in November, avoiding a contraction. Any sign that the recent slowdown in the manufacturing sector is spilling over into the service sector could weigh on the euro.

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. is a news site only and not a currency trading is a site operated by TransferWise Inc. (“We”, “Us”), a Delaware Corporation. We do not guarantee that the website will operate in an uninterrupted or error-free manner or is free of viruses or other harmful components. The content on our site is provided for general information only and is not intended as an exhaustive treatment of its subject. We expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of our site, any you may not rely thereon for any purpose. You should consult with qualified professionals or specialists before taking, or refraining from, any action on the basis of the content on our site. Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Some of the content posted on this site has been commissioned by Us, but is the work of independent contractors. These contractors are not employees, workers, agents or partners of TransferWise and they do not hold themselves out as one. The information and content posted by these independent contractors have not been verified or approved by Us. The views expressed by these independent contractors on do not represent our views.