Sterling strengthens ahead of key Bank of England inflation report

Claire Hogarth12/Nov/2014Currency Updates

GBP

Sterling bucked its recent trend of decline and strengthened slightly by 0.25% on the dollar in a day that saw mixed data out of the UK economy.

Another subdued day for the pound on Tuesday, although retail sales data released by the British Retail Consortium (BRC) came in above expectations at a stable 0% yoy for October. In contrast, the Council of Mortgage Lenders (CML) revealed that the number of first time house buyers in the UK dipped in September. The number of loans approved for first time buyers stood at 26,800, a drop of 3% on August to register its second consecutive monthly fall, although 16% up on this time last year.

UK unemployment data will come out today with the announcement of the ILO unemployment rate for September and the Claimant Count change. Both are expected to yield positive results for the UK economy.

EUR

A moderately strong trading session for the single currency as the euro rose by 0.3% on the dollar, regaining some lost ground for a currency that has fallen by 1.4% since the beginning of last month. The euro was also able to strengthen marginally on sterling, finishing the day 0.1% up and regaining ground that was lost at the start of the week.

The euro continued to trade within a narrow trading band with its peers in the absence of first tier data on Tuesday. Limited releases meant attention among analysts turned to Germany ahead of the much anticipated GDP announcement on Thursday. ECB policy maker Yves Mersch addressed an audience in Stuttgart stating that the economic situation in the country had become “critical” amid weak growth and unusually low inflation.

The main focus of today will be at 10am GMT when Eurostat will announce the annualised industrial production data for the Eurozone.

USD

Tuesday was a largely stable day for the dollar amid low liquidity during the US holiday for Veterans Day. The US Dollar Index did, however, fall overall by 0.3% after some slightly disappointing sales data.

The Rebook index, a measure of same-store sales growth among US retailers, fell by 1% month on month in November and dipped marginally to 3.8% yoy, down from 3.9% last month. US small business optimism, however, rose in October according to a National Federation of Independent Business index which climbed from 95.3 to 96.1, recording its second highest reading since 2008 in the process.

Today sees the release of mortgage application figures for November followed by wholesale inventory data by the US Census Bureau at 3pm London time.

Rest of the world

The Japanese yen continued its decline on Tuesday, falling 0.7% on the dollar and hitting fresh seven year lows. This came amid reports that Japanese Prime Minister Shinzo Abe was preparing to call a snap election after signs that his economic reforms might be faltering.
Ukraine’s hryvnia was the biggest loser of the day, however, dropping by 6.2% during a frantic day of trading, with the currency now having fallen by 18% since the central bank scrapped its target exchange rate of 12.95 per dollar a week ago. Elsewhere, the South African rand rose by 0.7% against the dollar after manufacturing output rose in the country by the largest amount since September 2013.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.