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The pound was well matched versus the euro in the previous session. The pound euro exchange rate closed the session at €1.1668, 0.1% higher on the day. This was the second straight day of gains for the pound.
The pound initially dropped lower in early trade on Wednesday following disappointing inflation figures. Data from the Office of National Statistics showed that UK inflation fell to its lowest level in almost three years in October. The consumer price index (CPI) dropped to 1.5%, down from September’s 1.7%. Weaker inflation will give a boost to households spending in the run up to Brexit. This is important because consumer spending has helped keep the economy growing through Brexit uncertainty.
However, the weak inflation will also add pressure to the Bank of England to cut interest rates as its next move. The prospect of loser monetary policy sent the pound lower.
Today investors will look towards UK retail sales figures. Analysts are predicting a steady 0.2% increase month on month in October. This would be in line with September. On an annual basis retail sales are set to increase 3.4%, up from 3% in September. Retail sales are considered an indication of future inflation. Strong retail sales points to a pickup in inflation down the line. This is pound positive, because in a higher inflation environment the BoE would be more inclined to hold off from cutting rates.
Will Germany Have Fallen Into Recession?
The euro strengthened in early trade on Wednesday, before paring gains later in the session. The euro advanced thanks to stronger than forecast eurozone industrial production data. Industrial production in the bloc improved for a second straight month in September, rising 0.1% month on month, resulting in a milder than expected contraction year on year. This could be a sign that the downturn in the sector is moderating; a plus for the euro.
Today investors will look ahead to the German and eurozone GDP. Analyst are expecting the German economy to have contracted by -0.1% quarter on quarter in the third quarter. The German economy also contracted in the second quarter. Two consecutive quarters of contraction is a technical recession. Should Germany be in recession, the euro could fall as investors assume that the European Central Bank will adopt a more accommodative stance to monetary policy.
| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 GBP = 1.13990 EUR Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound. Or, if you were looking at it the other way around: 1 EUR = 0.87271 GBP In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro. |
