GBP/EUR: Pound Heads Higher As EU To Mull Over Brexit Extension
  • Pound (GBP) shrugs off Brexit concerns, lifted by vaccine optimism
  • Services PMI expected to fall for 5th straight month
  • Euro (EUR) supported by weak USD & strong German retail sales
  • Euro services PMI expected to show a deep contraction in November

The Pound Euro (GBP/EUR) exchange rate is rebounding on Thursday after 2 days of losses . The pair settled -0.75% lower on Wednesday at €1.1028, after picking up from a 5 week low of €1.1008. At 05:15 UTC, GBP/EUR trades +0.12at €1.100.

The Pound has been under pressure this week, despite UK regulators approving Pfizer’s covid vaccine and the vaccination programme beginning next week. Vaccinations will start next week and this is boosting demand for the Pound on Thursday.

Brexit remains in focus. EU Chief Negotiator Michel Barnier warned the UK that a deal must be reached before the end of this week. The three key stumbling blocks which have kept Brexit trade talks deadlocked for months remain, these are fishing rights in British waters, ensuring fair competition and ways to resolve future disputes. Barnier said that “a deal hangs in the balance”.

In addition to Brexit developments, the service sector PMI will be in focus. The service sector is not only the most dominant sector in the UK economy, but also the sector most affected by the covid lockdown and social distancing measures.

The flash service sector PMI for November a month when the UK was in lockdown 2.0 recorded at 45.8 down from 51.6 in October and its 5th straight month of declines. Analysts are expecting the flash estimate to be confirmed. The level 50 separates expansion from contraction.

The Euro continued to surge higher across Wednesday, boosted by a weaker US Dollar and strong German retail sales surged in October, jumping 2.6% month on month, just before Germany started its partial national lockdown. This was a stark improvement on September’s upwardly revised decline of -1.9%.

Adding to the upbeat mood, Eurozone unemployment also ticked down slightly to 8.4%.

Looking ahead Eurozone PMI data will be under the spotlight. The flash November PMI recorded a deep contraction in the sector of 41.3, with France expected to see the sector sink even further to just 38.