EURGBP Sterling downside could be limited
If the Bank of England were voting for a rate change today, this morning’s disappointing UK PMI data may have encouraged one or two more within the Monetary Policy Committee to vote for an 'insurance' rate cut. That’s how the markets reacted today, as the pound slumped on the back of news the services PMI fell to 48.6 and manufacturing PMI eased to 48.3, both below the boom/bust level of 50.0. However, the BoE’s next policy meeting is on December 19, several days after the general election on December 12. So, it remains to be seen whether the BoE will actually cut interest rates given that the outcome of the election could have important implications in so far as Brexit is concerned. Indeed, the PMI data tends to be sensitive to Brexit uncertainty. Thus, if there is more certainty about the direction of Brexit post elections then the PMI numbers could rebound quickly. In other words, the pound may have overreacted to today’s disappointing data and could regain its poise, especially if the business-friendly Conservatives gain further ground in the polls.
However, there were no signs of a quick rebound this late in the day. So, if we are to see a comeback by the pound, it may come in the week ahead. Its best chance for a good comeback may well be against a weaker rival such as the euro, rather than the dollar, given the still-supportive US economy. Th EUR/GBP remains entrenched inside a bearish channel and with price being so close to this year’s earlier low of 0.8472, I would be very surprised if this level is not taken out in the coming days and week – barring an unexpected election surprise. That being said, the bears may wish to wait for a signal candle to form before expressing their views, given the recent recovery.
Source: Trading View and FOREX.com.
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.
FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.
FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.
GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2025