Race to the bottom
The lack of volatility within some key currency pairs was reaching concerning levels. The paralysis of pairs including GBPEUR meant that intraday volatility was almost negligible, with only minute and seemingly controlled fluctuations in the pair to observe. Despite that low volatility environment having set in for several months now, the race to the bottom in economic data may have finally pushed some volatility into the pair.
It started off yesterday with data from France, Germany and the Euro area as a whole released early on in the European trading session. The services component in particular for each geography of PMI data that was released was recorded far below expectations. Like we have discussed recently with services inflation data, a similar degree of attention is paid to other services-orientated data in order to get an early read on the economic components most reactive to core inflation. A miss of expectations in each geography and a move into contractionary territory for Germany and the Euro area (sorry France but you were already in contractionary territory), was enough to push the Euro significantly lower.
GBPEUR therefore sat for the early European trading session at an elevated level and at one of the highest rates we have seen for some time. However, very shortly after the Eurozone data, the UK’s own PMI readings were observed. This showed a similar fall into contractionary territory as we had seen for much of the Euro area only a short while earlier. Having exhibited higher volatility for some time now and with a stronger rate hiking cycle priced in, GBPEUR fell rapidly. From the technicals, GBPEUR has set up a bearish pattern with the ability to fall in the coming sessions whilst taking a breather amidst a data-light finish to the week for the pair.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Strong USD
Humphrey Percy
Fri 11 Jul 2025
Strong USD Those punitive tariff threats – Copper 50%, Brazil 50% and Pharmaceuticals 200% had a marked effect on USD. Bizarrely, while POTUS has been conducting his self-harming measures on the USA and the USD, he sees no contradiction in maintaining that he sees USD remaining the primary world reserve currency. A total of 22 […]
Daily Brief – Australia
Humphrey Percy
Wed 9 Jul 2025
Australia Falling inflation, sluggish economic growth, a strong currency, lower living standards and low productivity would normally easily add up to an interest rate cut by the central bank: not in Australia where it was widely expected that yesterday would indeed see a rate cut. That is because the Reserve Bank of Australia is worried […]
Daily Brief – Poland
Humphrey Percy
Mon 7 Jul 2025
Poland June 2025 will go down as a milestone for the energy sector in Poland as it was the first month that renewable energy overtook fossil fuels as a proportion of Poland’s total energy requirements. Poland is one of the highest emitting countries only behind China, Kuwait, South Africa, and Kazakhstan and despite coal consumption […]
