Pound ticks higher
The pound ticked higher yesterday, as the UK’s latest GDP report revealed the UK economy expanded at a faster pace than expected in 2019.
Sterling appears to be consolidating these gains this morning, with GBP/EUR stable at €1.1880 and GBP/USD flat at $1.2967. GBP/CAD and GBP/AUD are holding steady at C$1.7213 and AU$1.9268 respectively, while GBP/NZD tumbles to NZ$2.0064.
In the spotlight today we have the Eurozone’s latest industrial production figures. Will a slump in factory output send the euro lower this morning?
What’s been happening?
The pound accelerated against the majority of its peers on Tuesday in response to the UK’s latest GDP estimate.
While the Office for National Statistics (ONS) reported the UK economy stalled in its fourth quarter growth figures, the accompanying annual figures revealed an expansion of 1.1% through the entirety of 2020, beating expectations for a more modest rise of 0.9%, propelling Sterling higher.
Meanwhile, the euro was mostly rangebound through yesterday’s trading session as European Central Bank (ECB) President Christine Lagarde testified before the European Parliament.
In her statement Lagarde defended the ECB’s use of ultra-loose monetary policy and repeated her calls for Eurozone countries to step up and support the ECB’s stimulus efforts through fiscal policy.
The US dollar was also driven by central bank chatter on Tuesday as Federal Reserve Chair Jerome Powell appeared in front of Congress.
Speaking before the House financial services committee Powell said there were still risks that the coronavirus outbreak in China could have an impact on US monetary policy.
What’s coming up?
Top of the agenda today we have the publication of the Eurozone’s latest industrial production figures.
With Germany reporting last week that domestic factory output plummeted to a new decade low in December, expectations for the wider Eurozone are pretty gloomy.
Expect to see the euro slump this morning if industrial production contracts in line with expectations.
In the US, the second day of Powell’s testimony may have limited impact on the US dollar, with the ‘Greenback’ likely to weaken if another drop in new coronavirus infections prompts a risk-on mood in markets.
Finally, in the absence of any notable UK economic data we may see the pound struggle to maintain its upward momentum, particularly if Brexit returns to the fore.
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