- Pound (GBP) pushes higher on hopes of a Brexit deal
- UK PMI data beat expectations as UK economy shows resilience
- Euro (EUR) came under pressure after significantly weaker PMI data
- German GDP & IFO Sentiment data in focus
The Pound Euro (GBP/EUR) exchange rate extending gains for a 4th straight session . The pair settled 0.4% higher on the previous session at €1.1251, slightly off the high of the day of €1.1279. At 05:15 UTC, GBP/EUR trades +0.05% at €1.1255.
The Pound was well supported in the previous session by upbeat vaccine developments, news that the UK will move out of lockdown on 2nd December and by better than expected PMI figures.
UK services and manufacturing activity proved to be stronger than expected in November. The manufacturing sector remained firmly in expansion territory at 55.5, whilst the service sector unsurprisingly moved into contraction, although not as deep as initially feared.
Brexit continues to be a key theme for Pound investors. Whilst no Brexit trade deal has been agreed, optimism remains that the two siders are on the cusp of a deal.
Bank of England Governor Andrew Bailey warned that the cost of a no trade deal Brexit could be more in the longer term than the damage caused by covid.
The Euro was under pressure in the previous session after disappointing PMI data. The Eurozone composite PMI fell to 45.1 in November, down from 50 in October and worse than the 45.8 expected. The decline in the composite PMI was largely down to a sharp drop in in the services PMI (to 41.3 down from 49.6) reflecting the fallout from new lockdown measures introduced in the larger eurozone countries.
The Eurozone PMIs are inline with a deep contraction in eurozone GDP in Q4 meaning that a double dip recession looks unavoidable.
Attention will now turn to Germany’s Q3 final GDP reading which is expected to confirm 8.1% quarter on quarter growth. Given that the PMI data is a deep contraction, the Q3 data already seems outdated.
German IFO sentiment data could attract more attention. Analysts forecast a decline in sentiment in November as lockdown restrictions were imposed.