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Market Update - GBP EUR The Pound to Euro exchange rate reached a 2-week high of 1.2052 this morning as manufacturing data releases reflected positively on the British economy.
UK manufacturing PMI hit a 10-month high in March of 52.1, the strong British figure was largely due to an increase in export orders, with exporters seeking out revenue from further afield as markets in the Eurozone continue to stutter. The positive result could help combat fears that the UK is heading for another recession in the first quarter of 2012. However Eurozone manufacturing data for March showed a contraction for the 8th consecutive month, with the result falling to a 3-month low of 47.7. The poor European figure has sent the Euro downwards as fears of another recession escalate.
Last week the Pound to Euro exchange rate reached a 2-week low of 1.1911 as the Office for National Statistics revised their 2011 Q4 Gross Domestic Product figures from -0.2% to -0.3% to show that the UK economy shrunk by more than expected. However, Sterling received a timely boost on Thursday as a host of Eurozone confidence surveys came in worse than anticipated. The Pound also benefitted from uncertainty in Spain, as general strikes forced large parts of Madrid and Barcelona to a standstill on the eve of the Spanish budget. On Friday Spanish finance ministers announced a further €27 billion of cutbacks and the Eurogroup improved the Eurozone's firewall to €700 billion – however neither measures had significant effect on the market and the Pound held strong above the 1.20 mark against the Euro exchange rate.
Looking ahead and this week could see the Pound advance further against the Euro if market predictions of falling inflation and poor retail sales figures in the Eurozone prove to be accurate. Mario Monti and Mervyn King are both expected to maintain their current record low central bank rates of 1.0% and 0.5% respectively. The greatest risk for the Pound comes as the Bank of England Monetary Policy Committee announces their asset purchasing target for April. So long as no further bouts of quantitative easing are added, then the Pound could easily build upon today's encouraging manufacturing data and put pressure on the Euro exchange rate. Heads Up:
Summary of major upcoming data releases that we think may move the market. | Date | Time | Issuing country/region | Data Item | Market Expectation | Market Sensitivity | | | | | | | | | April 2nd | 08:00 | EUR | Eurozone Manufacturing PMI (March) | 47.7 | | | April 2nd | 08:30 | UK | UK Manufacturing PMI (March) | 50.7 | | | April 3rd | 08:30 | UK | UK Construction PMI (March) | 53.4 | | | April 3rd | 09:00 | EUR | Producer Price Index (YoY) (February) | 3.5% | | | April 4th | 09:00 | EUR | Eurozone Retail Sales (YoY) (February) | -1.1% | | | April 4th | 11:45 | EUR | ECB Rate Decision (April) | 1.00% | | | April 5th | 11:00 | UK | BoE Asset Purchase Target | £325Bn | | | April 5th | 11:00 | UK | BoE Rate Decision | 0.50% | | | April 5th | 14:00 | UK | NIESR GDP Estimate (March) | 0.3% | | | | | | | Sensitivity | | | | | | | Medium | | | | | | | High | | If you need any further assistance, or require a live dealing quote - please do not hesitate to contact me on 01736 335250 or send an email to info@torfx.com Regards,
TorFX 
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