The pound closed lower versus the euro on Thursday, snapping a three-day winning streak. The pound euro exchange rate dropped 0.2% to close at €1.1764, as the pair continue to trade within a familiar range. The pound is advancing in early trade on Friday.
A more dovish sounding Bank of England Governor Mark Carney sent the pound southwards in the previous session. Mark Carney gave a speech, within which he hinted that the central bank could soon cut interest rates, in order to boost the UK economy. In one of his final speeches Governor of BoE he said that the economy had been sluggish in recent months and inflation remains below the bank’s 2% target. The pound slumped sharply on the prospect of loser monetary policy.
Also weighing on demand for sterling was the upcoming trade negotiations with the European Union. With Boris Johnson standing firm that there will be no extension to the transition period, investors are growing nervous that the UK will leave at the end of the year on WTO trade rules. This would be a significant step down from the current arrangement.
Today there is no high impacting UK data for investors to digest. The BoE policy maker Tenreyo will give a speech in London over the outlook for the labour market which could attract some attention.
German Industrial Production Improves
The euro was in demand on Thursday following stronger that forecast industrial production data. Data showed that industrial production in Europe’s largest economy jumped by the most in 1.5 years. Industrial output was up by 1.1% month on month, ahead of the 0.7% that analysts had forecast. October’s fall of -1.7% was also upwardly revised to a decline of -1%. The stronger than forecast data helped boost the euro.
Yet despite encouraging industrial output data other data from the German manufacturing sector this week has been less encouraging. The mixed results suggest that it is still too early to call the bottom of the slump in the sector.
Today there is no high impacting eurozone data. Investors will be watching the US non-farm payroll report from the US. The euro moves inversely to the US dollar so a strong NFP report could pull the euro southwards.
|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.