Sterling to build on strength with industrial and manufacturing data?
Sterling has remained relatively robust so far this week and it could build on this foundation as industrial and manufacturing data is the only notable news out today. In annualised terms, both industrial and manufacturing are expected to rise by 0.6% and 1% respectively. Gains are expected in the MoM figures for both sectors too. A solid print this morning could push the Pound firmly into 1.42 territory against the Dollar and start to test 1.43 resistance.
Against the Euro, the Pound has continued it ascent over the last two weeks and opens comfortably in the 1.29 region. 1.30 could be breached depending on tomorrow’s European Central Bank (ECB) outcome.
Away from the economic data, the Bank of England voiced its concerns about the potential impact of a Brexit on the UK’s financial stability while trying to remain politically neutral. Governor Carney warned that any vote to leave the EU would risk damaging the economy and Sterling, but he was then accused by some members of the committee of having a pro-EU bias which Carney rejected.
Eurozone fourth quarter GDP figures were released yesterday morning, with QoQ GDP coming in as expected – it showed a 0.3% gain. The YoY figure showed a slight improvement on the market consensus, up to 1.6% from the 1.5% that was anticipated.
However with Mario Draghi due to speak on Thursday, the positive effect from the Eurozone data was short lived as investors are clearly waiting to see the outcome of the ECB policy meeting before deciding on a direction. Draghi will need to be decidedly dovish to make a real impact as the markets have already priced in another 10bps cut. Without setting off their “big bazooka”, the ECB run the risk of underwhelming the market like they did in December which caused the single currency to rally.
Data to watch: 9.30am UK Industrial & Manufacturing Production (MoM & YoY).