Important day for GBP/EUR rates

Good Morning. The pound rose against most currencies yesterday, after a period of decline. This morning at 08:30am rates are as follows:

  • GBP/EUR 1.1035
  • GBP/USD 1.6689
  • GBP/AUD 1.7906
  • GBP/NZD 2.2916
  • GBP/CAD 1.7457
  • GBP/CHF 1.6638
  • GBP/JPY 146.44
  • GBP/ZAR 12.117
  • EUR/USD 1.5117

Sterling rose against the USD and EUR yesterday, extending gains made the previous day as possible fallout from Dubai’s debt-related problems eased as it looks like UK banks are not as exposed to the debt problems there as first thought. Risk assets also got a boost after data showed U.S. private sector employers shed fewer jobs in November from October, marking the eighth straight monthly decline in private-sector job losses.

The pound also rose against a broadly weaker yen, traders said. The yen fell in the wake of the Bank of Japan’s emergency policy meeting on Tuesday where it said it provide more liquidity through new fixed 3-month funding.

Today is an important day for GBP/EUR in particular, as we have lots of important data releases from the Eurozone. We have the following releases that will likely affect exchange rates:

EU – Gross Domestic Product. This is is a measure of the total value of all goods and services produced by the Eurozone. The GDP is considered as a broad measure of the Eurozone economic activity and health. A rising trend has a positive effect on the EUR, while a falling trend is seen as negative. We expect this to show a quarterly rise of 0.4% and an annual decline of -4.1%.

We also have Retail Sales for the EU. This is is a measure of changes in sales of the German retail sector. It shows the performance of the retail sector in the short term. Percent changes reflect the rate of changes of such sales.The changes are widely followed as an indicator of consumer spending. We expect a monthly rise of 0.2% and a decline year on year of -2.4%.

An interest rate decision is also due for the EU. We expect rates to be left on hold for this month at 1%. A little after the announcement, there is a speech by the ECB. This will be more important than the decision itself.

They give a press conference as to how the ECB observes the current European economy and the value of EUR. His comments may determine a short-term positive or negative trend. If the speech seems to indicate rates may rise in the coming months, expect the Euro to strengthen and GBP/EUR rates to fall.

If the releases from Europe are good today, then we will probably see the recent rise in rates come to an end. If however the releases are not as good as expected, then the Euro may weaken. Either way, we’ll probably see some volatility for exchange rates today.

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We have lots from the US today also, including various measures of unemployment. If figures are good, then we will probably see the dollar weaken slightly as investors take good news as a sign of economic recovery, and diversify their investments to riskier currencies.

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