While the Pound began Tuesday trading close to a two-week high against the Euro the British currency later shed gains against its common currency counterpart.
Prior to the publication of UK business optimism data Sterling was deriving support from the expectation that today’s Confederation of British Industry report would show an improvement in confidence.
However, the index actually declined from October’s reading of 24 to 21 in January rather than climbing to 25 as expected.
Separate figures showed that a measure of CBI trends total orders dropped from 12 to -2 this month while the CBI trends selling price index advanced to 20 from 11.
While business optimism didn’t gain as expected, Pound losses were tempered as economists looked ahead to tomorrow’s much more influential UK employment figures.
Earlier in the European session the GBP/EUR pairing experienced modest fluctuations as a measure of German economic confidence declined for the first time in six months.
Instead of advancing to 64 in January, as economists expected, the economic sentiment measure slid from December’s 7 year high of 62 to 61.7.
The result may have been slightly disappointing, but in the view of senior economist Carsten Brzeski; ‘The fundamentals of the German economy remain strong. In our view, there are sufficient arguments in favour of an acceleration of economic growth rather than in favour of a drop in soft indicators. Today’s ZEW readings fit perfectly into this picture.’
Separate figures showed a better than expected increase in the German current situation and an impressive jump in Eurozone economic sentiment.
Tomorrow it will be UK news driving movement in the GBP/EUR pairing.
If the UK unemployment rate edges to 7.3 per cent, within touching distance of the 7 per cent marker set out by the Bank of England, speculation surrounding the prospect of a UK rate increase will mount and the Pound could fluctuate.
The Eurozone’s third quarter government debt report will also be of some interest.
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,1.3679 ,
Euro,,British Pound,0.8295 ,
Euro,,Australian Dollar,1.5234 ,
Euro,,New Zealand Dollar,1.6489 ,
Euro,,Canadian Dollar,1.4922 ,