- Brexit talks continue, mixed headlines drive Pound (GBP)
- Investors shrug off better than forecast construction data
- Euro (EUR) under pressure following ECB Christine Lagarde comments
- German factory orders jump 4.4% MoM
The Pound Euro (GBP/EUR) exchange rate is clawing higher after two straight sessions of losses. The pair settled -0.3% lower in the previous session at €1.0977 on Tuesday, after recovering from session lows of €1,0957. At 05:15 UTC, GBP/EUR trades +0.1% at €1.0984
Brexit headlines continue to drive movement in the Pound. The Pound slumped after an EU official said that the Internal Markets Bill was a “heavy blow to trust”. Brexit trade talks are continuing in London with headlines muddying the water. Another EU official said that a deal was close despite the rhetoric which suggests otherwise. The markets are waiting for an update from the UK and the EU on talk progress.
Brexit nerves prevented the Pound from moving higher on Tuesday despite very encouraging UK Construction PMI data. The rebound in construction activity accelerated in September thanks to the mini housing boom. The IHS / Markit Construction PMI rose to 56.8 in September from 54.6 in July. The level 50 separates expansion from contraction. September markets the 4th straight month that the sector experienced expansion.
Pent up demand and a stamp duty holiday have combined to create a mini housing boom. Today Nationwide will announce its house price index. After a 1.6% month on month increase in August, house prices ae expected to rise 0.6% in September.
The Euro is under pressure following comments from European Central Bank president, Christine Lagarde that she was concerned over the economic recover. In a speech, Christine Lagarde said that the bloc was unlikely to experience a V shaped recovery. Instead a much wobblier, more uncertain recovery was expected.
Supporting the Euro was German factory orders which surged 4.4% month on month in August, well ahead of July’s 2.8% jump. Analysts had expected an increase of 2.6%. The upbeat data comes following strong German retail sales last week and indicates that the largest economy in the Eurozone could be on the right path to recovery.
Investors will now await German industrial production data.