Euro out-performance continues, ahead of PMI data release on Tuesday
GBPEUR had a strong prior week, erasing multi-week lows around the 1.1295 mark to touch 1.14 following the strong inflation print from the UK. The pair has not faired as well during the start of week trade as it is currently down 0.45% from open at 1.1355, with lows of 1.1343 and highs of 1.1424 being noted.
With both UK and European economies recently hampered by high energy prices and their inflationary side effects, there is uncertainty over whether the Pound or Euro could be expected to benefit more if Tuesday's PMI surveys offer further signs of stabilisation in their respective industries.
The GBPUSD rate has rallied near to six-month highs during Monday morning trade, noting highs of 1.2448. There is potential it could rise further in the days ahead with a break above technical resistance at 1.2504 and an approach of 1.26 possible if UK and U.S. economic data remains conducive to a continued rebound for riskier currencies.
The Dollar was widely sold-off last week while GBP notched up gains over all comparable currencies, after further increases in the Bank of England Bank Rate became more likely for the months ahead.
Sterling overcame technical resistance on the charts, to climb for four days out of five in a rally that has squeezed one of the largest market short positions on the G10 field. It could rise further if incoming economic data remains benign enough to keep the Dollar on its back foot.
Risk of a corrective setback could enter the picture if Tuesday's PMI survey data suggests that December's bounce in activity was a false bottom for the UK manufacturing and services sectors, or if it transpires that consensus is too optimistic about this week's U.S. economic data.
The euro scaled a nine-month high on the dollar this morning as more hawkish comments on European interest rates contrasted with market pricing for a less aggressive monetary policy. In fact, ECB President Christine Lagarde, who last week pushed back against market bets that it would slow the pace of rate hikes given recent falls in inflation.
Furthermore, several European Central Bank officials are due to make appearances before policymakers enter their traditional pre-policy meeting blackout period on Thursday.
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