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GBP/EUR Recovers Ground in Spite of Weak UK Data

Yesterday’s high: €1.1326

Yesterday’s low: €1.1247

Weaker Service Sector Drags on Eurozone Outlook

Although German factory orders continued to accelerate at a solid pace, strengthening 9.5% on the year, this was not enough to bolster EUR exchange rates.

Investors were instead disappointed by the nature of the finalised raft of Eurozone services PMIs, which proved largely weaker than expected.

Particularly concerning was the loss of momentum in the Italian, Spanish and German service sectors, which undermined confidence in the general growth outlook.

A bullish US Dollar also weighed on the Euro, with the policy divergence between the European Central Bank (ECB) and the Federal Reserve looking set to widen further in the coming months.

The relative weakness of the single currency helped to boost the GBP/EUR exchange rate, in spite of underwhelming UK data.

While new car sales were found to have plunged -12.2% on the year in October, the mood towards the Pound nevertheless picked up.

In large part this was due to markets reversing some of the selling seen in the wake of the Bank of England’s (BoE) more dovish meeting minutes.

Euro Outlook: Dovish Draghi Could Worsen Downtrend

It will be another busy day in terms of Eurozone data today, offering the Euro plenty of opportunities to find a rallying point.

Any uptick in the Eurozone retail PMIs could encourage greater demand for the single currency by pointing towards sustained confidence amongst consumers.

September’s retail sales data may also paint a more encouraging picture of the economic outlook, giving markets fresh reason to favour the Euro.

However, commentary from ECB President Mario Draghi could weigh heavily on EUR exchange rates.

If Draghi maintains a generally dovish tone on the subject of monetary policy then the single currency may extend its downtrend further.

So long as the ECB looks set to leave interest rates at their current record lows for the foreseeable future, the GBP/EUR exchange rate is likely to hold onto some degree of strength.

Key Events

6th November

08:30 German Construction PMI

09:00 ECB President Mario Draghi Speech

09:10 Eurozone Retail PMI

10:00 Eurozone Retail Sales

 

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Arron Morris

Currency Dealer

T: (0) 1442 892 066

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