Pound to Euro (GBP/EUR) Sterling Exchange Rate breaks beyond 1.20 on positive data

The GBP/EUR pushed beyond the key 1.20 level on Tuesday after a string of positive industrial and manufacturing production reports bolstered confidence in the UK economic recovery and caused investors to shrug off yesterday’s comments by the Bank of England deputy governor.

Data released early in the morning of Tuesday’s trading session softened the single currency after current account and balance of trade data for Germany, the Eurozone’s largest economy came in below economist forecasts. GDP data out of Italy also came in worse-than-expected.

Tensions in Ukraine have also put some pressure onto the Euro. France revealed today that the EU was close to implementing sanctions against Russia if it does not pull its troops out of the Crimea. Also heightening tensions was the mobilisation of the Ukrainian military.

The Pound too softened early in the session after a report released by the British Retail Consortium showed that retail sales fell for the first time in close to a year in February as bad weather put off shoppers.

As the morning progressed Sterling found support from data which showed that factory production in the UK increased more than forecast in January, supporting signs that the UK economy is continuing to gain in strength.

According to the Office for National Statistics, output rose by 0.4% on a monthly basis and jumped by 3.3% compared to the previous year. Industrial production also showed improvement with production rising by 2.9% year on year. On a monthly basis however industrial production eased.

The Pound could make further gains if the NIESR’s GDP estimate comes in stronger than expected. The group currently predicts that the UK economy will expand by 0.8%, an improvement in that figure will offer support to the currency.