GBP/EUR: Will UK Service Sector PMI Drag Pound Lower?
  • Pound (GBP) rises as Omicron so far deemed less severe
  • UK economic calendar is light
  • Euro (EUR) rises after business activity expanded
  • German ZEW economic sentiment data tomorrow

The Pound Euro (GBP/EUR) exchange rate is pushing higher at the start of the week clawing back some losses from last week. The pair lost -0.76% across the previous week settling below €1.17 on Friday at €1.1691 at the low of the day.  At 05:45 UTC, GBP/EUR trades +0.28% at €1.1724.

The Pound lost ground on Friday as investors sold out of riskier assets and currencies. The Pound is considered to be riskier than the Euro. Concerns over Omicron cases rising across the globe unnerved investors.

The market has been highly reactive to Omicron news as it waits for further information over whether the variant can evade vaccines and whether it is more severe than other variants of COVID.

Early data suggests that the new variant isn’t causing a surge is hospitalizations. The US are reportedly reconsidering the travel ban to South Africa. The news has lifted the mood in the market. How it is still early days.

Data on Friday showed that activity in the dominant service sector grew firmly in November at 58.5, although this was downwardly revised from 58.6.

This week the UK economic calendar is relatively quiet with GDP data on Friday expected to be the highlight. In the meantime, Omicron developments will be watched carefully.

The Euro received a boost on Friday after data revealed that business actibity in the region expanded in November, although growth was uneven across nations with Germany experiencing the weakest growth. The composite PMI for the Eurozone came in at 56.9, up from 54.6 in October, although this was down slightly from the preliminary reading of 55.9.

Meanwhile retail sales rose by a better than forecast 1.4% year on year in October. Although this was just a small increase of 0.2% month on month as inflation in the region reached a 30 year high. Looking ahead, November’s figures could be weaker as the fourth wave of COVID hits the region.

There is no high impacting Eurozone data due to be released today. Investors will look ahead to the release of German ZEW economic sentiment figures on Tuesday.