- Pound (GBP) steady after BoE shock
- This week is a quiet week UK data wise
- Euro (EUR) rose despite weak data
- German ZEW sentiment data
The Pound Euro (GBP/EUR) exchange rate is ticking a few pips lower at the start of the week . The pair lost over 1.4% across the previous week, closing on Friday at €1.1664, at the low of the week and the lowest level in 6 weeks. At 05:45 UTC, GBP/EUR trades -0.01% at €1.1762.
The Pound tumbled across the previous week after the Bank of England surprised the market by keeping interest rates on hold at 0.1% in the latest monetary policy meeting. For the weeks before the meeting the policy makers at the central bank and particularly Governor Andrew Bailey had started to sound much more hawkish over where policy was heading. Consequently, the market was almost fully pricing in an interest rate hike by the BoE. The disappointment sent the Pound lower.
This week the UK economic calendar is quite quiet. The main focus will be on Thursday’s third quarter GDP release. Expectations are for the UK economy to have slowed from 5.5% growth in the second quarter to 1.5% in Q3. Brexit will also be in focus as relations deteriorate between UK & EU.
The Euro capitalized on the weaker Pound charging higher last week despite disappointing data. German industrial production contracted by 1.1% in September, defying economists’ expectations of a 1% rise. Weaker than forecast German data appears to be becoming a trend as the Eurozone’s largest economy suffers amid the ongoing supply chain shortage and rising costs.
Retail sales in the Eurozone also unexpectedly contracted in September by -0.3% compared to August. Analysts had expected an increase of 0.3%. Germany registered the biggest decline in sales followed by Finland and the Netherlands.
The fall in sales comes as the fourth wave of COVID hits the continent. The World Heath Organisation described Europe as the new epicenter of the pandemic.
Today there is no high impacting data due to be released. Attention will be on ECB policy maker Lane who is due to speak.
Looking further ahead German ZEW sentiment data will be in focus.
