Strong Uptake At Today?s Spanish Bond Auction Sends GBP EUR Exchange Rate Lower

Published: Thursday, 22 November 2012 15:00 BST - Written by Tim Boyer

STORY LINK Strong Uptake At Today?s Spanish Bond Auction Sends GBP EUR Exchange Rate Lower

This morning brought a busy schedule of data releases in the eurozone. Generally, the European figures were stronger than anticipated, with the whole-of-eurozone Composite Purchasing Manager Index survey for this month showing a slight improvement on last month’s reading of 45.7. The latest PMI Manufacturing Index for the region, also released this morning, beat expectations by an even greater distance, registering at 46.2. The figures suggest that the economy in mainland Europe is showing some signs of twitching back to life following its lethargic performance during the first 10 months of 2012.

Meanwhile, today’s Spanish bond auction saw a significantly higher than anticipated uptake for the debt-laden Iberian state’s governmental debt than had been expected. The Madrid administration managed to shift some 3.88bn of medium-to-long term bills, suggesting that bond market participants are now more confident regarding the ongoing Spanish and pan-European debt difficulties than was previously the case.

The developments in Europe combined to trigger a sustained bout of support for the single currency on the day. This saw the GBP EUR exchange rate tumble from an opening level in the 1.2400s to touch 1.2364 earlier. There could be more downside to come for the pair if tomorrow’s German GDP data for Q3 shows at above early estimates of a 0.2% quarterly print.

The main risk event of note this afternoon came in Canada in the form of September’s domestic monthly Retail Sales data which showed at a lower than anticipated 0.1% - down from last month’s 0.3%. The release has seen the Canadian Dollar give up ground against the Pound, sending the GBP CAD exchange rate back above the 1.5900 level.

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