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GBP/EUR Recovers Ground on Strengthening Services PMI

Friday’s high: €1.1262

Friday’s low: €1.1189

Catalan Worries Hamper EUR

The decision to remand eight members of the deposed Catalan administration in custody weighed heavily on the Euro ahead of the weekend.

Catalans largely decried the move as politically motivated, fuelling fresh tensions within the region.

While the possibility of Catalonia now achieving independence from Spain is seen as almost non-existent, the constitutional crisis remains a major headwind for EUR exchange rates.

This overshadowed a marked tightening of the Spanish labour market in October, with the fallout of the crisis set to drag on the economy over the course of the fourth quarter.

The GBP/EUR exchange rate benefitted from this renewed sense of political jitters, recovering some of the losses seen in the wake of the Bank of England’s (BoE) dovish meeting minutes.

Confidence in the Pound improved further over the course of Friday’s trading session thanks to a better-than-expected services PMI, which rounded off a solid trio of October PMIs.

With the UK economy showing fresh signs of strength at the start of the fourth quarter, demand for the Pound improved.

Euro Outlook: Strong Service Sector Growth Could Offer Support

The Euro could gain on the back of the finalised raft of Eurozone services PMIs, provided they follow the positive example of the corresponding manufacturing data.

If the Eurozone continues to demonstrate strong growth this could keep the currency union on track to outstrip the US economy for the second year in a row.

This would be largely positive for the single currency, even if the European Central Bank (ECB) is still likely to maintain a cautious policy outlook for some time to come.

September’s Eurozone producer price index data will also be in focus this morning, with investors hoping to see fresh evidence of building inflationary pressure.

A lack of UK data is likely to limit the upside potential of the GBP/EUR exchange rate.

Key Events

6th November

08:55 German Services PMI

09:00 Eurozone Services PMI

10:00 Eurozone Producer Price Index

 

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Adam Wiffen

Currency Dealer

T: (0) 1442 892 064

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