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GBP/EUR slumps following mixed UK data release

currency-newsGBP/EUR slumps following mixed UK data release
The pound tumbled on Thursday, on the back of some mixed UK economic data, and weakening Bank of England (BoE) tapering expectations.

Meanwhile, Sterling is stuck in a narrow range so far this morning, with GBP/EUR flat at €1.1765 and GBP/USD muted at $1.3807. GBP/CAD is subdued at C$1.7282, while GBP/AUD and GBP/NZD hold steady at AU$1.8809 and NZ$1.9712 respectively.

Looking ahead, will another softening of US consumer sentiment weigh on the US dollar this afternoon?
 

What’s been happening?

The pound fell back yesterday, in spite of a strong print in the UK’s latest quarterly GDP estimate.

While the UK recorded a solid 4.8% expansion in Q2 growth as more of the economy opened back up, the accompanying business investment figures printed well below expectations, highlighting how firms remain cautious in the face of ongoing pandemic uncertainty.

The pullback in Sterling then accelerated later in the afternoon, amidst an apparent dialling back of BoE tapering expectations.

The euro was mostly muted on Thursday, following the release of the Eurozone’s industrial production figures.

June’s release reported a larger-than-expected drop in factory output, whilst also revising May’s figures lower as supply chain issues continued to confound manufacturers in the bloc.

The US dollar, meanwhile, maintained a positive trajectory through yesterday’s European trading session, as a cautious market mood saw skittish investors favour the safe-haven currency.

This upside in the US dollar was reinforced by some positive US data releases, with jobless claims falling in line with expectations last week, whilst producer prices rose faster-than-expected in July.
 

What’s coming up?

The only release of note today will be the publication of the University of Michigan’s consumer sentiment index.

This could put some pressure on the US dollar later this afternoon, if it reports that US consumer morale weakened again in August.

In the meantime, the Eurozone will publish its latest trade figures this morning. June’s figures are expected to show a healthy increase in the bloc’s trade surplus, but as a second-tier data release, its impact on the euro may be minimal.

In the absence of any notable GBP data, the direction of the pound may be driven by domestic coronavirus developments today, potentially offering some support if new cases continue to trend lower.
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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