- Pound (GBP) eases back from Brexit highs
- Rising covid cases & fear of 3rd national lockdown drag on demand
- Euro (EUR) well supported by weaker USD
- Manufacturing PMIs in focus
The Pound Euro (GBP/EUR) exchange rate is holding steady on Monday. The pair rallied across the previous week, settling at 1.1192 on Thursday 31st December a 5-week high. At 05:15 UTC, GBP/EUR trades at €1.1170, off the overnight high of €1.1180.
The British Parliament approved the Brexit deal at the end of last week, pushing the Pound sharply higher across the board. The Pound was seemingly unaffected by the fact that the post Brexit trade deal excluded the crucial service sector which accounts for around 80% of economic activity in the UK.
With Brexit done, attention is quickly swinging back to the UK’s covid crisis as new daily infections remain above 50,000 for a fifth consecutive day. Several parts of the country moved into the toughest Tier 4 lockdown conditions last week. UK Prime Minister Boris Johnson warned over the weekend that UK restrictions will probably get tougher.
The Prime Minister is expected to take a decision today as to whether to put all of England back into full lockdown.
Data wise UK manufacturing PMI figures will be in focus. The flash December reading showed that manufacturing activity was surprisingly strong at 57.3, whereby the level 50 separates expansion from contraction. Whilst the manufacturing sector is less affected by the pandemic and lockdown restrictions, Brexit stockpiling will have undoubtedly also played a role.
The Euro has been well supported in recent weeks and months by the falling USD. The USD was the weakest major in 2020 and the Euro trades inversely to the greenback.
Eurozone manufacturing PMI data will also be in focus. As in the UK, the sector has been a bright spot despite tightening lockdown restrictions across the region.
The recent flash December manufacturing PMIs for the eurozone as a whole and Germany particularly were encouraging. Germany’s manufacturing PMI recorded 58.6 whilst the Eurozone recorded 55.5. Analysts are expecting these figures to be confirmed.