Pound Hits 6 Year Best vs Euro Before Manufacturing PMI Disappointment Sparks Selling

The pound sterling (GBP) hit a 6 year best against the euro on global exchange rate markets at the start of the new year.

The gains confirm the notion that the pound to euro exchange rate could well breach the 1.30 level in 2015.

However, the strong start to the new year was ultimately hampered with the first major economic release of the year which came in below expectations.

The pound to euro exchange rate (GBPEUR) is currently quoted at 1.28, a high of 1.2911 was reached on the spot markets ahead of the release of disappointing industrial data out of the UK.

New High for Euro Buyers

The pound sterling was seen trading above the 1.28 level at the start of the new year, offering buyers of the euro the best levels in 6 years.

The attainment of these levels comes largely courtesy of the weakness in the euro exchange rate complex at the present time.

Charles Purdy at Smart Currency Business comments:

“We enter the New Year with high levels of uncertainty in the Eurozone.  The upcoming Greek election could result in an anti-austerity and anti-Eurozone government determined to renegotiate the existing debt agreements it has in place.

“We are also waiting for the European Central Bank to start their much anticipated programme of quantitative easing with the aim of kick starting the Eurozone economy.

“This uncertainty has resulted in euro weakness and this morning the euro briefly reached a level against sterling last seen in 2008.”

The euro finished off 2014 in largely disappointing fashion, seeing losses against a number of its major partners.

The shared currency dropped to the worst level in three months against sterling, nearing the two and a half year lows seen at the start of October.

The euro also continued its fall against the US dollar, extended to a further low, the lowest since July 2012.

Manufacturing PMI Disappoints, Sends GBP/EUR Lower

Putting an end to sterling’s impressive run against its European cousin was the first of the three Markit PMI data releases due out in January.

The releases are much-anticipated by currency traders as they offer a trusted insight into the current performance of the UK economy - the GBP was boosted at the start of December when the series beat analyst expectations.

The UK manufacturing sector ended 2014 coming in at 52.5 as December saw rates of expansion in production and new orders ease to the second slowest for over one-and-a-half years.

Analysts had forecast a reading of 53.7.

Rob Dobson at Markit tells us:

“The latest survey provides further evidence of the ongoing slowdown in the UK manufacturing sector, with output and new order growth easing to their second-weakest rates during the past year-and-a-half.

“Despite this end of year tapering, the sector still performed well over 2014 as a whole, with growth averaging at its highest since 2010.

“The positives to come out of the December readings are the continued growth, further solid increases to workforce numbers, a supportive domestic market that is driving new contract wins and the broad-base of the upturn across the consumer, intermediate and investment goods industries.

“The main weak spot remains exports, with overseas new order inflows stagnating amid weaker economic growth in key markets and the ongoing lethargy of the euro area.”

Whether the pound will make a break higher against the euro once more will depend on the outcome of the data due in the first full week of 2015.

The services PMI will be of particular importance while euro-watchers will be keen to see what action is announced at the European Central Bank regarding quantitative easing this January.