GBP/EUR: Euro Jumps vs. Pound As German Coalition Averts Collapse
  • Pound (GBP) eases from 20 month high
  • UK economic calendar is quiet
  • Euro (EUR) rises after upbeat PMIs
  • German IFO Business sentiment

The Pound Euro (GBP/EUR) exchange rate is heading higher on Wednesday paring some losses from the previous session. The pair settled 0.3% lower on Tuesday at €1.1888 after failing to hold around the 20-month high of €1.1938 reached earlier in the week.  At 05:45 UTC, GBP/EUR trades +0.09% at €1.1899.

The pound came under pressure on Tuesday despite better-than-expected business activity in the UK in November. The closely watch composite PMI which is often considered a good gauge for business activity reported a reading of 57.7 in November, slightly down from 57.8 last month.

The data also revealed that cost inflation in the private sector remained elevated. Firms in the service sector said in the survey that margins were coming under pressure due to the surge in input costs.

The data showing robust growth, labour market recovery and rising prices could support Bank of England policy makers when they look to take the monetary policy decision next month. The BoE surprised the market b y not moving on interest rates in the November meeting.

Today the UK economic calendar is quiet so the Euro could drive movement in the pair.

The Euro jumped higher in the previous session after business activity across the board ramped up further in November. The composite PMI came in at 55.8, up from 54.2 in the previous month and defying expectations of a fall to 53.1. The level 50 separates expansion from contraction.

The data suggests that the Eurozone economy is showing decent growth at the start of the fourth quarter. Delving deeper into the data, price pressures continued to build. The data prompted bets that the European Central Bank could start tapering bond purchases soon, lifting the Euro.

Today attention remains very much on the economic calendar with German IFO business climate data due to be released. Analysts are expecting business sentiment to ease slightly in November to 96.6 down from 97.7. A weaker than forecast reading could see the Euro fall lower.