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EUR/GBP Exchange Rate climbs to $0.84 as Strong Eurozone PMIs Released

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EUR/GBP Exchange Rate Reverses Recent Losses

The Euro to Pound (EUR/GBP) exchange rate is rallying today, helping to reverse some of the pairing’s losses from last week. 

At the time of writing, the EUR/GBP exchange rate has seen an increase of approximately 0.38% since the start of today’s session and is currently trading at around $0.8423.  

Euro (EUR) Strengthens on  Better-Than-Expected PMI Flash Data 

The Euro (EUR) boosted at the start of today’s session as the latest Eurozone PMIs printed higher than forecast.  

This morning, the Eurozone’s services and manufacturing sectors both reported stronger-than-expected growth in November. – 

The Eurozone Services PMI rose in November to 56.6 from October’s 54.6, outperforming expectations for a modest decline to 53.5. 

At the same time, the Eurozone Manufacturing PMI climbed 58.6 in November, up from 58.3 in October and above  forecasts of a larger drop to 57.3. 

Chris Williamson, Chief Business Economist at IHS Markit, said: 

‘A stronger expansion of business activity in November defied economists’ expectations of a slowdown, but is unlikely to prevent the Eurozone from suffering slower growth in the fourth quarter, especially as rising virus cases look set to cause renewed disruptions to the economy in December.  

‘The manufacturing sector remains hamstrung by supply delays, restricting production growth to one of the lowest rates seen since the first lockdowns of 2020. The service sector’s improved performance may meanwhile prove frustratingly short-lived if new virus fighting restrictions need to be imposed.’ 

The strong PMI data is supporting the single currency today despite worries of rising Covid cases seen across Europe’s mainland.  

Pound (GBP) Falls amid Brexit Concerns and Weak UK PMI  

The Pound (GBP) softened against many of its peers today as Brexit issues continue to dominate headlines. Northern Ireland protocol negotiations continue to hinder GBP despite the UK signalling a softer approach.  

Although triggering Article 16 is not ruled out, International Trade Secretary, Anne-Marie Trevelyan, has said that ‘[she doesn’t] think anyone’s calling Article 16 before Christmas, absolutely not.’ This has suggested that the UK may ease their stance with regards to Brexit talks. 

Furthermore, the November’s Composite PMI Flash data, released at the start of today’s session, shows a marginal decline from 57.8 to 57.7. 

The manufacturing PMI for November printed at 58.2, increasing on both the previous month’s 57.8 and the forecast57.3. 

On the other hand, the November’s UK services PMI shrank from 59.1 to 58.6 

Chris Williamson, Chief Business Economist at IHS Markit, said: 

‘Output growth across manufacturing and services came in slightly faster than expected in November, albeit heavily skewed towards the service sector as factories continued to struggle with supply shortages and falling exports. 

‘Encouragingly, an acceleration in growth of new business hints that December should bring a strong end to the year, meaning the fourth quarter should see a welcome pick up in GDP growth after the slowdown seen in the third quarter.’ 

EUR/GBP Forecast: Euro to Face Headwinds as Covid Cases Increase 

Looking ahead, the Euro may encounter turbulence this week as Covid cases continue to climb throughout Europe.  

Moreover, various policymakers from European Central Bank (ECB) are expected to deliver speeches throughout the week and Germany’s latest third quarter GDP estimate is set to be released on Thursday. Both of these may cause movement in EUR market.  

The Pound may struggle as a lack of notable data is due to be released this week. However, Bank of England’s (BoE) Governor, Andrew Bailey, and policymaker, Jonathan Haskell, are set to deliver speeches on Thursday which may influence market movements.  

Further impact may come from November’s UK CBI Industrial Trends Orders set to be released on Wednesday, which is forecast to rise to 13 from the previous month’s 9.