EUR falls – we await GBP inflation data tomorrow
After a prolonged period of relative strength against the Dollar and Sterling, the Euro appears to be back on the decline over the last couple of days. Renewed concerns about European sovereign debt, and Irish banking concerns in particular, are returning to haunt the Euro after most had thought it had managed to shake off these fears. A weak figure for German industrial output for the month of September, a surprise when it appeared, to all intensive purposes, that the German economy was beginning to drag the rest of the Eurozone out of the mire, did nothing to lift Euro sentiment. Falling to its lowest level in over a week versus the USD overnight, the euro could remain under pressure over the coming days as markets focus on Europe’s fiscal woes. Allied with a market that is reportedly still short of dollars as a result of positions taken ahead of last week’s key Fed meeting, this could give the single currency further to fall yet.
Sterling has benefitted against the Euro to the tune of around a cent so far this week. The big event for Sterling this week is tomorrow’s Quarterly Inflation Report, which will give the market it’s first opportunity in a while to see an holistic analysis of UK economic performance from the BoE. The minutes of recent MPC meetings have given little away apart from the feeling that factions are starting to arise within the committee, without any great conviction in either argument towards a more dovish or hawkish stance to short term monetary policy.
UK data released overnight were mixed, with the BRC retail report for October showing sales up 0.8% year-on-year, a pick-up from the previous month’s growth rate. However, the RICS house price balance came in much weaker than expected, with a lack of mortgage finance and an uncertain economic outlook dragging the headline index to an 18-month low. Today sees the release of the industrial production and trade reports for September, with the data expected to show continued growth in the manufacturing sector