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Pound plunges against Euro as economy falters

Pound plunges against Euro as economy falters

The pound advanced against the euro, snapping a three-day decline, before a report tomorrow that economists forecast will show U.K. mortgage approvals increased for a sixth month in December. Sterling fell to the weakest level in 13 months versus the common currency yesterday after Mark Carney, who will become governor of the Bank of England in July, said central bank around the world have room to ease monetary policy further if needed. Data will show mortgage approvals rose in November.

The German economy has been suffering from the Euro debt crisis along with the rest of the region, and the economy only grew 0.7% in 2012, down from 3.0% growth in 2011. The ECB has forecasted that the Euro-zone economy will begin to recover later in 2013, which should also help improve growth in the German economy. A rise in the rate of German GDP growth would be Euro positive.

On the FX Markets, GBP underperformed this morning and GBP/USD hit a five-month low at 1.5711, following comments over the weekend from Mark Carney who said central bankers should be prepared to take aggressive measure to help economies. The focus on Carney’s comments is likely to intensify in coming weeks given Carney’s appearance before the Treasury Select Committee on 7 February and the Budget on 20 March, which will give Chancellor Osborne an option to change the policy remit. Close below 1.5755 which is the August 28th low will open the door towards the 62% retracement of the June 2012 to January 2013 bull trade at 1.5694. On the other hand, resistance levels are seen at 1.5795, 1.5852 and then at the 10DMA line at 1.5876.

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