GBP/EUR: Pound Rallies Ahead Of BoE Announcement

The euro slipped versus the US dollar for the fourth consecutive week last week. The safe haven US dollar was bid higher on coronavirus fears, whilst the euro dropped on a cautious sounding European Central Bank. The euro US dollar exchange rate dropped to a 7-week low of US$1.1020 before closing the week down 0.6% at US$1.1025. The pair is advancing in early trade on Monday despite coronavirus fears remaining.

The euro was on the back foot last week after the ECB’s President Christine Lagarde was more dovish than what market participants were expecting. Her failure to acknowledge improving economic statistics from the eurozone disappointed investors pulling the euro lower. The euro failed to rebound on Friday despite PMI data showing that the German manufacturing sector contracted by less than what analysts had been expecting, offering signs of recovery in Europe’s largest economy.

Euro investors will continue to watch eurozone economic data carefully this week, for further signs of recovery in the bloc’s economy. Today the focus will be on IFO German business confidence, which analysts are expecting to have improved in January. This will be followed by GFK confidence data on Wednesday.

In the latter part of this week there are several high impacting releases such as German unemployment, inflation and retail sales in addition to eurozone inflation and confidence data. Further signs that the bloc’s slowdown is turning a corner could boost the euro.

Coronavirus, Fed & Data Heavy Week To Drive Dollar

Fears over the spread of coronavirus and its potential impact on global trade boosted demand for the safe haven currencies such as the Japanese yen and the US dollar in the previous week. As the mortality rate increases and the number infected rises, safe haven flows could continue to underpin the dollar across the coming week.

The US economic calendar is also saturated in the final week of January meaning that the US dollar could see an increase in event-based volatility. On Tuesday Us durable goods orders and consumer confidence orders will be in focus. On Wednesday, the Federal Reserve monetary policy announcement, followed by Thursday’s GDP reading and Friday’s inflation number.

Recent US macro data has pointed to the US economy being on a solid footing, but not heating up to the extent that the Fed needs to adjust monetary policy just yet.

 

 

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 EUR = 1.12829 USD

Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.

Or, if you were looking at it the other way around:

1 USD = 0.88789 EUR

In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.

 


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