Euro Reaches 4 Month High

19 October, 2012

Simon Eastman

On Thursday the Euro made further gains against sterling, reaching its highest trading level since June. The Pound came under pressure as Bank of England policy member David Miles hinted that the MPC may introduce further quantitative easing at the next meeting in November. This adds to the speculation already rife following Wednesday when inflation dropped further towards the target 2% which gives the BoE room to manoeuvre should they feel more QE is the best option to stimulate growth. As we have seen in the past when QE comes into play, the Pound suffers as effectively the more there is of something available the cheaper it becomes.

Sterling performed down against not only the Euro but the dollar also and a number of other currencies. This was despite better than expected retail sales which rose 0.6% last month and the better than forecast unemployment data from Wednesday which showed 50,000 less unemployed. We will have to wait until next week when the all important growth measure GDP comes out, the first reading for the last quarter. If a positive figure is achieved then the Pound will almost certainly benefit but on the flip side, if a negative reading comes out, showing a third consecutive quarter of negative growth this would be extremely detrimental.

Today the UK has public sector borrowing figures released at 9.30am along with EU current account data. Across the pond in Canada we have inflation figures and in the US house sale figures. For those with currency requirements who are looking to tie up the deal by the end of the month keep in close contact with your broker here at Currency Index to avoid getting caught out by the recent volatility.