Dear Subscriber, Please find below our latest update for your chosen currency. If you need to discuss your requirements further, please contact your account manager or call us on 0800 612 9625 or +44 (0)1736 335250. GBP EUR Market Update Sterling rallied by around 1.5 cents against the Euro last week as another set of inspiring British economic data combined with a less-dovish-than-expected Bank of England policy statement to enhance demand for the Pound.
GBP/EUR strengthened from around 1.1500 to 1.1570 last Monday as an ultra-impressive 6-year high Service Sector PMI print of 60.2 raised hopes that the British economy is still expanding in the second half of the year. Eurozone PMI data came in above the 50.0 level that separates growth from contraction but, with the currency bloc still operating at substantially lower levels than the UK economy, the Euro was left chasing Sterling's shadow.
On Tuesday British data printed positively again as Industrial Production smashed expectations of 0.6%, coming in at 1.1%, and Manufacturing Production printed at 1.9%, beating forecasts of 1.0%. The dataset indicated that for the first time in over 20 years all 13 categories of the UK Manufacturing Industry posted positive growth. With a broad-based economic recovery starting to take shape in Britain the Euro was lucky to avoid further defeats against the Pound, however, a better-than-expected Italian GDP result of -0.2% and a robust German Factory Orders score of 4.3% lent the single currency some support.
Sterling soared higher by around a cent to 1.1620 on Wednesday as the Bank of England revealed that interest rates would remain at the current record low until Unemployment falls to 7.0%. The BoE made no mention of the asset purchasing target, but reserved the right to tighten monetary policy if UK CPI inflation remains above 2.5% for 18 months, or if other economic conditions warrant higher interest rates. Although the statement was packaged as forward guidance markets interpreted it as an exit strategy for the way that it laid out options for an end to ultra-loose monetary policy. Investors scaled forward their bets for an interest rate hike and subsequently the Pound soared across the board.
GBP/EUR remained flat on Thursday as financial markets stuck with their initial evaluation of the BoE policy statement. On Friday Sterling grew modestly by 0.2 cents as traders continued to express worries regarding the soft credit conditions in the currency bloc.
Later this week mildly optimistic Eurozone data is expected to show that the 17-nation bloc emerged from its two-yearlong recession in the second quarter but the most important three events are likely to come in the form of British releases.
With monetary policy in the UK tied to inflation this week's Consumer Price Index will be scoured by investors for signs of future interest rate direction. If the CPI print shows a slowdown from 2.9% to 2.8% as anticipated then Sterling could slide slightly, however, a stronger score has the potential to send the Pound soaring. Similarly, the Unemployment Report will also prove crucial in determining market sentiment towards the Pound. An unexpected improvement in the labour market could give GBP/EUR a significant boost. The BoE Minutes will also carry some sway, as investors will be interested to see whether the decision to announce guidance was unanimous. If it appears that the decision was split then it is possible that Sterling will rally as traders push forward interest rate hike forecasts. 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 | | Aug 13 | 07:00 | EUR | German Consumer Price Index (YoY) (JUL F) | 1.9% | | | Aug 13 | 09:30 | GBP | Consumer Price Index (YoY) (JUL) | 2.8% | | | Aug 13 | 10:00 | EUR | Euro-Zone Industrial Production w.d.a. (YoY) (JUN) | 0.3% | | | Aug 13 | 10:00 | EUR | German ZEW Survey (Economic Sentiment) (AUG) | 39.9 | | | Aug 14 | 06:30 | EUR | French Gross Domestic Product (YoY) (2Q P) | -0.1% | | | Aug 14 | 07:00 | EUR | German Gross Domestic Product s.a. (QoQ) (2Q P) | | | | Aug 14 | 09:30 | GBP | Bank of England Minutes | | | | Aug 14 | 09:30 | GBP | ILO Unemployment Rate (3M) (JUN) | 7.8% | | | Aug 14 | 10:00 | EUR | Euro-Zone Gross Domestic Product s.a. (QoQ) (2Q A) | 0.2% | | | Aug 14 | 10:00 | EUR | Euro-Zone Gross Domestic Product s.a. (YoY) (2Q A) | -0.8% | | | Aug 15 | 09:30 | GBP | Retail Sales (YoY) (JUL) | 2.7% | | | | | | | 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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