- Pound (GBP) remains focused on Brexit as clock ticks
- Service PMI beat forecasts but still contracted
- Euro (EUR) slipped after business activity contracted in November
- German factory orders in focus
The Pound Euro (GBP/EUR) exchange rate is holding steady on Friday. The pair settled +0.4% higher in the previous session at €1.1070. At 05:15 UTC, GBP/EUR trades flat at €1.1070. The pair is on track to lose -0.5% across the week, a second straight week of losses.
Brexit continues to be the main driver of the Pound. In the previous session the Pound surged on Brexit trade deal optimism even though headlines were decidedly mixed. Whilst the UK and Ireland were saying that talks were progressing well and that a deal is imminent, EU diplomats were far more cautious saying that differences remain between the two sides.
Michel Barnier has warned that a deal needs to be achieved this week. Volatility in the Pound has picked up as the deadline draws closer.
Data also revealed that England’s latest lockdown measures dealt a smaller blow than expected to UK service sector activity. The IHS Markit services PMI fell to 47.6 in November down from 51.6 in the previous month. However, this was better than the 45.8 that analysts expected. The level 50 separates expansion from contraction.
Today, the only data release is the UK construction PMI which is expected to show the sector continued to grow in November, given that it wasn’t included in the lockdown restrictions.
The Euro slipped versus the Pound but advanced versus the US Dollar in the previous session, supported by a weak greenback and amid mixed data.
Eurozone business activity contracted last month as governments across the region tightened lockdown restrictions to stem a second wave of covid. However, optimism showed signs of recovering on vaccine hopes.
The IHS Markit composite PMI, considered a good guide of economic health, sank to 45.3 in November, down from 50 in October. However, optimism over the coming year improved and the future output subcomponent jumped to 60.4 from 56.5.
Looking ahead German Factory orders will be in focus.
