The European Central Bank’s decision to leave policy unaltered for the next month may have supported the Euro over the course of trading on Thursday, but the Pound was able to claw back losses this morning.
The expectation that the UK would release an upbeat industrial production report helped Sterling advance and the EUR/GBP pairing was further knocked by the news that the legality of the European Central Bank’s bailout procedures is being questioned in Germany’s top court.
However, before the release of German industrial production figures the Pound trimmed gains as UK industrial output was shown to have expanded by less-than-forecast.
Month-on-month, industrial production increased by 0.4 per cent in December, less than the 0.6 per cent gain expected but better than the negatively revised decline of 0.1 per cent recorded for November.
On the year industrial output was 1.8 per cent higher.
Meanwhile, manufacturing production also increased by less-than-hoped, coming in at a gain of 0.3 per cent vs. expectations for a 0.6 per cent advance.
Manufacturing production was up 1.5 per cent on the year.
November’s figures were negatively revised.
Whilst these reports indicate that the UK’s economic recovery is starting to lose steam, it wasn’t all doom and gloom for Britain today as a separate report showed that the UK’s trade balance increased by more than expected in January.
Economists had forecast that the UK trade balance would rise from -9.78 billion Pounds to -9.30 billion in January, but it actually advanced to 7.72 billion Pounds – the smallest trade deficit for more than a year.
A poll conducted by Ipsos Mori also found that optimism regarding Britain’s economic recovery has achieved its strongest level since 1997, with over half of those questioned believing that the economy would continue improving next year.
Further EUR/GBP movement is likely to occur in the hours ahead as a result of both today’s German industrial output report and UK growth data.
Given that UK services, construction and manufacturing reports have all fallen short of estimates in recent weeks it seems likely that the pace of growth slowed from the 0.7 per cent recorded in December.
If that proves to be the case, we forecast that the EUR/GBP pairing will continue fluctuating until the weekend arrives.
US non-farm payrolls figures are also expected to have a notable impact on currency market movement.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3573 ,
Euro,,British Pound,0.8317 ,
Euro,,New Zealand Dollar,1.6479,