The British pound is higher against the euro on Tuesday, recouping some the of the heavy losses felt on Monday following a poorly received speech by UK Prime Minister Boris Johnson in markets. The Pound Sterling recovery was assisted be better than expected UK construction data and a general improvement in risk sentiment from investors.
GBP/EUR was higher by 26 pips (+0.22%) at 1.1776 with a daily price range of 1.171 to 1.179 as of 1pm GMT. An early slide below 1.175 was fully recovered by the afternoon though the currency pair remains below 1.18. On Monday GBP fell -1.26% in its biggest one-day drop this year.
Pound Sterling
Better-than-forecast construction data released on Tuesday went some way to dispelling the renewed selling pressure that has hit the British currency this week. Construction has proved particularly sensitive to the outlook for Brexit and sunk into contraction alongside a lull in the housing market. That purchasing managers are seeing some orders come back in supports the view that the renewed certainty brought about by the general election can lift the economy into a better performance in 2020.
Nonetheless, the price moves tell the story. The rebound in the pound on Tuesday came nowhere close to undoing the losses from Monday. Tensions between the UK and the EU on trade and the ongoing risk of ‘No Deal’ is keeping a lid on gains made by Sterling. Likewise, the tone at the Bank of England has turned a lot more cautious and next to no economists are predicting any UK rate hikes this year.
Euro looks directionless as markets await signs of an economic recovery
While it has been making strides against the pound this week, the euro looks otherwise directionless as markets await signs of an economic recovery in the Euro-area that has any chance of shaking the ECB out of its ultra-loose monetary policy.
There were mixed signs on European inflation at the start of 2020 on Tuesday. Consumer prices in Italy rose at a faster pace than expected however producer prices in the Eurozone continued to fall, albeit at a slower pace of decline.