Thin data puts pressure on the Euro

12 December, 2013

Graham Harborne

The week so far has largely been a struggle for the Pound largely due to a lack of UK economic activity and a number of releases across the pond and in Europe. We have seen some mixed numbers in both the States and the Eurozone but there have been a number of speeches this week along with various comments by so called ‘experts’ that have seen the Euro go from strength to strength. It seems that the rate cut we saw by the ECB last month is now deemed to be a positive thing and there are also harsh warnings being sounded regarding the eventual rise in interest rates here in the UK. BoE governor Mark Carney has made clear that this will be monitored very closely with regards to unemployment levels and perhaps now more importantly house prices which are continuing to rise and the BoE are clearly wary of creating an unwanted housing boom. So with a lack of poor UK news and a 2% dip against the euro this week should sellers of sterling be worried? There are 2 possible answers to this and it is difficult to know which one is the truth, in fact it is more likely that both are possible scenarios. The first being that the pound has dropped on the back of very little UK data and certainly nothing that has created any shockwaves. If we were to get a data release that came in dramatically below expectations we could see the pound tumble a lot further. The other argument is that for many months now the 3 majors we trade with (GBP, EUR and USD) seem to be taking it in turns when it comes to performing well. The dollar rallied earlier in the summer, the Pound has been rallying for the past 3 months so now may just be the turn of the Euro. Another thin day for UK data but the ECB monthly report and inflation figures are due from Europe this morning and in the States we have retails sales this afternoon. Expect the action to be between those 2 currencies today but be mindful of the Pound slipping further on the back of any surprising figures. As always your CI Account manager is always here to help in any way they can.