- GBP to EUR – Pound sterling traded with a positive bias versus its major peers on Tuesday
- Pound to Euro – EUR slipped, after Christine Lagarde highlighted the slowing growth momentum in the eurozone
Pound sterling extended gains versus the euro for a third straight session on Tuesday, despite a mixed batch of data.
The pound euro exchange rate closed the day 0.2% higher at €1.1866, just shy of the day’s high. The pound is holding those gains in early trade on Wednesday, as investors look ahead to eurozone industrial output data.
GBP traded with a positive bias versus its major peers on Tuesday
Investors digested a raft of data which painted a mixed picture of the UK economy. UK economic growth beat analysts’ expectations both on an annual basis and on a monthly basis. Annually, UK GDP grew 1.1%, above the 0.8% forecast. However, quarter on quarter the data showed that Britain’s economy stagnated, as growth in the service and construction sectors was offset by weakness in the manufacturing sector. Expectations for economic growth in the fourth quarter were already low so this was no surprise to investors.
Month on month, the British economy expanded 0.3%, versus the 0.2% forecast. This supports the view that the UK economy picked up following the decisive Conservative win in the December elections. More recent survey data has shown an uptick in confidence since mid-December. Investors are now waiting to see whether that will translate into improved hard data.
Today there is no high impacting UK data for investors to digest. Attention is likely to remain on Boris Johnson and his spending plans to improve connectivity across the UK. Any Brexit headlines will also be monitored closely ahead of trade negotiations, which are due to start next month.
GBP/EUR – Euro slipped, after Lagarde highlighted the slowing growth momentum in the eurozone
The euro slipped versus the pound on Tuesday, after European Central Bank President Christine Lagarde highlighted the slowing growth momentum in the eurozone. She added that inflation remains some distance from the ECB’s target. Christine Lagarde had another push governments in the bloc to increase fiscal spending, insisting that it is a policy that can be highly effective in a low interest rate environment. Her comments helped lift the euro off session lows.
Today eurozone industrial production data will be in focus. Analysts are expecting industrial production in the bloc to decline -1.7% month on month in December, well down from the 0.2% increase in the previous month. Such a weak figure could show that the slump in the manufacturing sector is still a long way from bottoming out.
