EU GDP figures today. Outlook for GBP/EUR

Sterling hit a 1 week low against the dollar yesterday, staying weak after comments from the Bank of England earlier in the week. Also disappointing U.S. data propped up the safe haven US Dollar. The pound rose against the Euro however, coming off an earlier 2 week low, with traders citing selling of euros versus sterling by corporate accounts. Rates @ 08:30am are as follows:

  • GBP/EUR 1.1190
  • GBP/USD 1.6663
  • GBP/AUD 1.7942
  • GBP/NZD 2.2653
  • GBP/CAD 1.7512
  • GBP/ZAR 12.384
  • GBP/JPY 150.18
  • EUR/USD 1.4886

Analysts said sentiment towards the pound remained negative after comments on Wednesday by BoE chief Mervyn King that suggested the BoE was leaving the door open to more Quantitative Easing, and he highlighted the benefits of a weak currency (again!). Of course a weak pound is good for exports, but the fact is we are not a nation of exporters; we import much more, and so a weak pound is worse for most people.

“The market’s still reading Mervyn King’s comments to be on the dovish side,” said Paul Mackel, director of currency strategy at HSBC. “At the end of the day the Bank of England is still dovish, it is still expanding QE, and although sterling is undervalued versus the euro I can’t see it’s at the key turning point where it’s going to correct just yet.”

So, expect the pound to stay weak against the euro as monetary policy interest rates in the UK are seen staying at very low levels for much longer than rates in the euro zone, as they are expected to raise rates as the exit recession.

Euro zone GDP
Euro zone preliminary data due today is expected to show the Eurozone came out of recession in the third quarter. This would contrast sharply with the UK, where recent data showed GDP unexpectedly still contracting.

We have GDP data today for Germany, by far the largest economy in the Eurozone, as well as GDP for the whole EU. It is a measure of the total value of all goods and services produced by Germany & the EU. The GDP is considered as a broad measure of economic activity and health.

A high reading or a better than expected number has a positive effect on the EUR, while a falling trend is seen as negative.

The German data has already come in lower than expected, boosting the GBPEUR rate due to a weakening of the Euro. The EU figures are out at 10am, and is expected to be +0.5%. Any different, and expect volatility in pound to euro rates.

Other Data Today
Ger – Gross Domestic Product
Swi – Producer Prices
EU – Consumer Price Index
EU – Gross Domestic Product
US – Import Prices
US – Trade Balance
US – Consumer Sentiment

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