German Industrial Production boosts euro, ahead of Bank of England MPC meeting

Tom Tong09/May/2013Currency Updates

GBP

The results of the BoE meeting concerning the asset purchase facility will be released at 11am this morning. This decision concerns the quantitative easing that the BoE uses to inject money into the economy through the use of open market bond purchases. Any change in the £375 Billion QE figure will cause major volatility in sterling.

The BoE will also release interest rate figures at 11am. If the BoE believes that the UK is managing its growth and inflation and decides to raise the interest rates, this will be a positive sign for GBP.

Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

USD

A very quiet day for USD without any economic reports. It gave up ground to the yen, euro and sterling, however finished higher against the Kiwi and the Aussie. For the most part, it was market sentiment that dictated the currency’s price action. The better-than-expected trade balance figures from China allowed risk appetite to pick up a bit, and might have cost it a few points from its counterparts. The data showed that the Asian country’s exports outpaced its imports by 18.2 billion USD, more than the expected reading of 15.5 billion USD.

As for today only the unemployment claims report is due at 12:30 and is expected to come in at 333,000. From previous releases of this data it seems that the dollar is being more and more affected by the unemployment claims, so it is one to look out for today.

EUR

The EUR performed strongly yesterday with the help of strong German data. Despite all of the gloomy data from Germany that has been released, industrial production actually picked up. Output had unexpectedly increased by 1.2% in March, contrary to the 0.1% decline that most analysts had predicted. This seems to have relieved the euro from pressure brought about by recent weak economic data and dovishness from the ECB.

In broader news from the EU, eurozone chiefs have expressed that members should not be allowed to block important bailout deals by themselves. Countries like Germany have held fierce debate over how much cash they should lend to troubled governments in Cyprus and Greece, as they do not want their frugal taxpayers to bail out profligate peripheral states.

Today the European banks are closed in celebration of Ascension Day so data releases will be scarce.

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Written by Tom Tong

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