PMI Data Weaker Than Expected
Pound to euro exchange rates dropped away from the 1.2 marker this morning as UK purchasing managers index came out lower than forecast. Although the figure was above 50 showing growth in the sector, the figure was down on last month and lower than expected for this month showing the sector is shrinking. The EU figure also came out lower than expected but the better than expected retail sales figures for the last month in the Eurozone has given the single currency the edge against sterling and the dollar. EU retail figures were expected to show a negative figure for both monthly and yearly levels but both came in better, with a 0.3% for the month and 0% flat rate for the year on year.
The rest of the week has a few key economic data releases which may affect your currency purchase:
Tuesday:
UK – Halifax house price index
EU – GDP
Thursday:
UK (12pm) and EU (12.45pm) – Interest rate and Asset purchase program decisions. The EU decision is followed by the ECB press conference at 1.30pm
Friday:
UK – Trade balance, Manufacturing and Industrial production, Producer price index, all at 9.30am. Later in the day the NIESR GDP estimate
All the above will likely move the pound to euro exchange rates, which way depends on how the figures look. If you have a requirement coming up in the near term keep in touch with us here at poundeuroexchange for updates and contact the author directly via sre@poundeuroexchange.co.uk or one of our team of experts.
Sterling Positive After Inflation Report
Mervyn King today announced the inflation report, predicting that inflation in the UK would drop below the 2% target this year and possibly remain so through 2013 and 2104. He said GDP will remain weak going forward but should pick up as households real incomes recover, helped by further monetary stimulus.
Growth will remain slow and the one of the key factors to consider is the problems in Greece and the Euro zone as a whole. King suggested that one of the most important obstacles holding back recovery was a resoultion to the Greek debt problems.
Euro ministers are now due to hold a conference call to decide on Greece who have stated they have met all the requirements imposed to cut spending. Time will tell if the bailout is signed off!
What has this all meant for the markets… well for sterling its a positive having gained half a cent so far against the Euro which remains under pressure. Low inflationary forecast and the hint of further monetary stimulus by King may start to come into play if and when the Greek bailout is signed off though as to me that indicates further QE, which as we have seen tends to weigh negatively on the pound.
For further discussion contact me directly sre@poundeuroexchange.co.uk or get in touch with one of the brokers at specialists Currency Index to discuss your currency requirements.
GDP Down – The Pound Gains Against Euro
Today saw the release of worse-than-expected gross domestic product data showing the UK economy contracted by 0.2 percent in the final quarter of 2011 and signs that the Bank of England is preparing for another round of quantitative easing.
Despite this the pound recouped losses against the euro, after falling to within sight of a near four-week low in early London trade as market players positioned for a weak GDP number. Concerns about the European Central Bank having to write down its Greek bond holdings as part of a deal to avoid a disorderly default also weighed on the single currency.
Bank of England minutes from the last policy meeting, released at the same time, showed members voted unanimously to keep total asset purchases at 275 billion pounds, although the minutes also said a further expansion of asset purchasing was “likely” to be required.
Market players said sterling was oversold against the euro on some concerns of an even weaker GDP number. The fact that no BoE policymakers voted for an increase in QE this month – even though it is strongly expected in February – also lent some short-term support to the pound.
“There were a couple of calls of minus 0.7 percent from a couple of forecasters which maybe spooked people. There was definitely some chat of weaker numbers ahead (of the data) so I think that’s why we’ve seen a bit of a bounce, combined with the minutes not guaranteeing any extension of QE,” said Adrian Schmidt, currency strategist at Lloyds Bank.
There was little reaction in sterling to a CBI industrial trends survey that showed British factory orders shrank in January, though at a lower pace than forecast.
