GBP dragged higher as EUR weakens on inflation data, USD falls on payrolls report

Poor data from the Eurozone and the US allowed the pound to recover some of the week’s losses on Friday, but a lack of UK data prevented the pound from truly capitalising.

The pound is largely on strong form this morning. GBP/EUR is edging away from opening levels, having risen to €1.1287, although GBP/USD has fallen -0.2% to US$1.3542. GBP/AUD has shot up 0.4% to AU$1.7295, while GBP/NZD is edging up from opening levels at NZ$1.8923. GBP/CAD is stuck flat at C$1.6812.

The UK data calendar again remains empty. Will the pound be able to put in a repeat of Friday’s performance today? Read on to find out…

What’s been happening?

After recording losses earlier in the week, the pound was able to recover some ground versus the euro and US dollar on Friday, although Sterling still ended the session below the week’s highs against both of its peers.

While Sterling was able to capitalise on weak Eurozone and US data, a lack of impactful UK ecostats meant that the pound lacked the support required to notch up further gains.

The Eurozone data calendar started well, with German retail figures for November posting surprisingly strong growth of 2.3% month-on-month and 4.4% year-on-year - a considerable improvement upon October’s declines and the forecasted readings.

However, the latest Eurozone consumer price index data showed that core inflation - a measure of price growth excluding the volatile impact of food, fuel, tobacco, and alcohol products - unexpectedly held steady at 0.9% instead of accelerating to 1%.

Meanwhile, markets were left uncertain over how to interpret the latest US non-farm payrolls report for December.

The pace of job creation slowed dramatically on the month, clocking in well below the forecast level of 190,000 at 148,000. However, November’s figure was revised higher by nearly 30,000 to 252,000, more or less balancing out discrepancies in long-term.

What's coming up?

The UK data calendar is once again relatively lacking, although there is always the potential for Brexit or political developments to create volatility for Sterling later in the session.

The euro could find strong support today if the upcoming investor, consumer, and business confidence indices, as well as Eurozone retail sales figures, show the kinds of improvements forecast.

There is nothing impactful upon the US data calendar before the close of trade, so markets may hang fire on the US dollar in anticipation of two speeches during the North American session from Federal Reserve officials Bostic and Williams, on the economic outlook and inflation targeting respectively.

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Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.