EUR/GBP: Scope for a test of 0.8675 – TDS

Analysts at TD Securities provided their view on Friday's release of Eurozone/UK PMI prints, which resulted into a modest rebound for the EUR/GBP cross.

• "The Eurozone PMIs for November showed manufacturing generally stronger than expected, with Germany in particular beating markets by one full point. But the services PMI for the Eurozone overall was almost a full point weaker than expected at 51.5 (mkt 52.4), its lowest print since January.
• This morning's first-ever flash PMIs for the month of November were very disappointing, with the manufacturing PMI falling from 49.6 to 48.3 in November (mkt 48.9), and the services PMI from 50.0 to 48.6. Markit noted that this level of PMIs is consistent with Q4 GDP of -0.2% q/q.
• A lack of significant directional cues from Lagarde's speech (see below) has kept investors focused on the November PMI parade. Here, the divergent fortunes of the German and UK manufacturing series provide an interesting allegory for a rebound in EURGBP. The cross has been carving out a base in that cross for several weeks and we think existing shorts will be forced into a significant rethink if it reclaims a 0.86 handle. With GBP looking too rich and domestic political factors looking increasingly priced, we see scope for a test of 0.8675 in the days ahead.”