UK services PMI came in much better than expected and rose above 60 for the first time in over 6 years. The UK economy is certainly performing much better than expected and data out today will enhance future UK GDP growth.
As soon as the data was announced Sterling rose sharply and has continued to extend gains this morning, Sterling had been hovering near a 52 week low against the Euro trading below 1.15 before the figures but is currently trading at 1.1560.
Sterling has been very weak against the Euro in recent weeks (and has fallen from above 1.25 in January and 1.28 from this time last year) but with recent economic data coming out of the UK showing positive signs, Sterling should continue to gain ground against the Euro which is still mired in problems yet has shown remarkable strength against the majors.
Weak non-farm payroll figures on Friday pushed the US dollar sharply lower against both Euro and Sterling although this should be a temporary move against the greenback.
With the Euro close to 1.33 currently, this seems to be factoring in a lot of good news for the European economy but there are countries within the union where unemployment is above 50% for 18-30 year olds, protests and political dis-satisfaction as well as upcoming elections in Germany are all factors that could disrupt this sharp rally in the Euro.
There seems to be a case of over- confidence and over exuberance in the Euro. Things can change very quickly as history has shown.
Sell the Euro into strength against the US Dollar and Sterling.
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