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GBP/EUR Spikes on Positive Industry Data

Friday’s high: €1.0968

Friday’s low: €1.0868

Pound Shoots Higher Vs Euro after Strong Economic Data

The outlook for the UK economy during the third quarter was much-improved after the latest round of UK ecostats was released on Friday. GBP/EUR was able to record gains of 0.7%.

Industrial and manufacturing production both beat expectations on the month and on the year, while the trade deficit narrowed from -£2.9 billion to -£2.8 billion instead of rising to -£3.3 billion as expected.

Although the construction output figures showed a severe decline both on the month and on the year, the NIESR GDP estimate for August cheered markets after rising to 0.4% from July’s 0.2%.

This helped to keep focus away from the concerns surrounding the government’s EU withdrawal bill and the wider direction of Brexit negotiations.

The Euro, meanwhile, was beginning to row back on Thursday’s sharp gains, which were caused by suggestions that changes to the European Central Bank’s (ECB) quantitative easing programme would be discussed in October.

Trade data also highlighted the issues facing the Eurozone as Euro exchange rates strengthen. German exports grew just 0.2% month-on-month in July, compared to forecasts of 1.3%, while the trade surplus fell from €22.3 billion to €19.5 billion against estimates of a drop to €21 billion.

Euro Outlook: Empty Data Calendar Leaves Focus on Tomorrow’s UK Inflation Figures

With no data set for release from either the UK or the Eurozone today, GBP/EUR may be left in a state of flux for much of the session. Unless fresh Brexit news or speculation rises from the UK political sphere, or additional clues regarding ECB monetary policy emerge from the Eurozone, the pairing could be in a for a quiet day.

Tomorrow will be a different story, however. Although there is still no Eurozone data scheduled for release, the latest UK consumer price index figures will be published. Covering August, these will show whether embattled households continue to struggle with strong levels of price growth, which would dampen spending further and slow growth in the UK’s dominant services sector.

The Bank of England (BoE) still seems determined to keep interest rates low in order to help stimulate the softening UK economy, so signs of rising inflation are unlikely to push up the odds of a near-term rate hike substantially. Weakening inflation would suggest households will see their spending power weakened to a lesser degree, which could actually see the Pound rise; an inverse reaction to how inflation data is usually evaluated by the currency markets.

Key Events

12th September

09:30 GBP Consumer Price Index (MoM) (AUG)

09:30 GBP Consumer Price Index (YoY) (AUG)

09:30 GBP Core Consumer Price Index (YoY) (AUG)

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.

Arron Morris

Currency Dealer

T: (0) 1442 892 066

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