The pound snapped a four-session losing streak versus the euro on Monday, the pound euro exchange rate rallied 0.4% to close at €1.1765. The pound is climbing higher versus the euro as trading kicks off on Tuesday.
Stronger than forecast U.K. service sector data helped boost sentiment towards the pound. Activity in the service sector improved at the end of 2019 after a decisive general election result and some Brexit clarity which boosted business optimism. The IHS Markit/ CIPS service sector pmi ticked higher to 50 in December, up from 49.3 in November. The figure 50 separates expansion from contraction.
Increasing new orders combined with a recovery in business confidence supported a lift in employment levels across the sector, the fastest rise in employment for five months. Given that the pmi’s are considered a measure of health for the economy, and the service sector accounts for 80% of economic activity the outlook for the UK economy appears to be improving. As a result, the pound rallied.
Today there is no high impacting U.K. economic data due to be released. The pound could come under pressure if investors turn their attention back to Brexit and the transition period. Boris Johnson is due to meet with European Commission President Ursula Von Der Leyen on Wednesday. Investor will be watching keenly for any further clues over the negotiating period.
Euro Supported After A Slew Of Beats, More Data To Come
The euro traded broadly higher on Monday, albeit not as high as the pound, as investors cheered a slew of strong data. German retail sales smashed analysts’ expectations jumping 2.1% month on month in November, well ahead of October’s -1.6%. German composite pmi reading printed growth rather than the contraction as expected. Looking at the Eurozone as a whole, the pmi beat expectations with the service sector at 52.8 whilst the composite figure which gives a good idea of the health of the economy as a whole printed at 50.9. Whilst the data was better than forecast is wasn’t sufficient good to change the outlook for the Eurozone.
This week euro investors have plenty of data to digest. Today investors will remain focused on the Eurozone economic calendar with Eurozone retail sales, inflation, confidence data and German factory orders expected to drive movement in 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.