The Euro has weakened over the last 24 hours, helping push Pound/Euro rates back up to almost €1.14, helping this pair recover most of the losses we saw after the Bank of England cut interest rates last week. This move upwards has been largely caused by weakness in the single currency however, rather than any particular strength in the Pound.
The reason for the Euro weakness is worse than expected economic data from the Eurozone. Firstly, Germany which is the EU’s powerhouse economy posted worse than expected Industrial production figures earlier this morning. We also saw EU wide Retail Sales numbers a few moments ago that while slightly better than expected, hasn’t help the Euro gain. Mario Draghi also made dovish comments earlier this morning, and all of the above has helped to weaken the Euro and push GBP/EUR higher.
Also helping rates was a slight up tick in UK house prices. However most gains today have only been against the Euro for the reasons outlined above. Against other currencies such as the USD, AUD and NZD, Sterling remains largely unchanged.
What next for the Pound?
The next data we’re looking out for, is the latest UK growth forecasts on Thursday, and the latest UK Industrial and Manufacturing production figures on Friday, along with Trade Balance numbers. These will be watched closely and the expected numbers will be as follows:
- Monthly Industrial Production + 0.1% (last time it rose by +0.2%)
- Monthly Manufacturing Production + 0.3% (last time it rose by 0.4%)
If the actual numbers are better than this, then we would expect Sterling to gain against other currencies. If however the figures are worse than expected, we would expect Sterling to edge lower. The releases come at 09:30am on Friday morning.
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