The Pound to Euro exchange rate commenced last week’s trading at a 5-week high of 1.2071, before slipping to an 8-day low of 1.1946 following a dovish Bank of England Minutes report on Wednesday.
Once again Monetary Policy Committee member’s Adam Posen and David Miles voted in favour of an additional £25 billion to be added to the central bank’s asset purchasing fund. Miles and Posen argued that added stimulus would help avoid damage to the supply capacity of the economy, whilst the committee as a whole voiced concerns over inflation in relation to rising fuel prices. Although the MPC voted 7-2 in favour of keeping the quantitative easing target steady at £325 billion, the prospect of further QE in the near future knocked GBP down from its pedestal above the 1.20 mark.
George Osborne’s Budget report proved less sticky for the Pound as his microeconomic policies were generally considered to be fiscally neutral. On Thursday GBP/EUR mustered up enough strength to rally back above 1.20 as a raft of Eurozone PMI data came in worse than expected. But Sterling fell back down as markets digested a poor return from UK Retail Sales. The figure was expected to show an improvement of 2.3%, but the actual result came in at 1.0%. Subsequently the Pound to Euro exchange rate consolidated at 1.1960 before markets closed for the weekend.
The Pound has remained under pressure from the Euro this week as strong German IFO statistics for the 5th consecutive month have kept the rate around the 1.1950 level. Looking ahead and the main points of interest this week are the UK’s finalised Q4 GDP results, German inflation figures, and Eurozone inflation estimates. The Office for National Statistics’ finalised fourth quarter GDP figures are unlikely to be revised, but with optimism rising for the UK economy in 2012, it is possible that we could see Sterling surge against the single currency in the near future.
Summary of major upcoming data releases that we think may move the market.
|Date||Time||Issuing country/region||Data Item||Market Expectation||Market Sensitivity|
|March 28th||08:30||UK||Gross Domestic Product (Q4)||-0.2%|
|March 28th||12:00||EUR||German Consumer Price Index (March)||2.2%|
|March 29th||07:55||EUR||German Unemployment Change (March)||-10K|
|March 30th||09:00||EUR||Eurozone Consumer Price Index Estimate (March)||2.3%|
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