LONDON, Aug 21 (Reuters) - The euro rose broadly and euro zone government bonds reversed gains on Friday after a surprisingly strong reading of German manufacturing and services activity spurred optimism that the euro zone economy is improving.
A flash estimate of the Markit composite purchasing managers’ index (PMI), which surveys the service and manufacturing sectors, rose to 54.2 from 49.0 in July, passing the 50 mark that separates contraction from expansion [ID:nLAG003678].
The euro EURGBP=R rose as high as 86.65 pence according to Reuters data, up around 0.4 percent on the day, to hit its highest level since late July.
It jumped nearly half a cent against the dollar to a one-week high of $1.4291.
Euro zone government bonds reversed gains, with September Bund futures FGBLU9 falling to a session low of 122.52 from 122.60 just before release of the data.
The 10-year Bund yield was at 3.261 percent from 3.245 percent before while two-year Schatz yielded 1.300 percent versus 1.294 percent prior to the data.
Reporting by London Markets Team