The Pound Sterling made a gradual gain against the Euro over the course of Tuesday after negative European data outweighed poor UK data, despite the Scottish bid for Independence anchoring Sterling. With several important economic data publications due for release later on Wednesday, the likelihood of market volatility is very high, and he Pound to Euro exchange rate will be no exception.
The Pound Sterling to Euro exchange rate was trending in the region of 1.2524 towards the end of the European session.
Sterling has been subject to intense volatility over the past few weeks as the upcoming Scottish referendum has dominated trader focus. With separate polls giving different results and with the lead seemingly changing hands continuously only one thing is certain; this is going to be too close to call. The fear of the unknown has led Sterling to trend very low against the majority of its major peers as traders opt for risk aversion.
Tuesday’s British economic data has only served to boost the Sterling downtrend. Whilst the Consumer Price Index met with the forecast figure of 1.5% it was still a decline from the previous figure of 1.6%. Given that the Bank of England has set a target inflation of 2.0% the data was badly received.
European data on Tuesday was particularly poor. The German ZEW Survey for Economic Sentiment dropped from 8.6 to 6.9, the Eurozone survey for economic sentiment also fell from 23.7 to 14.2. The German ZEW Survey for the Current Situation showed the biggest declination. With the market consensus of a slight drop from the previous figure of 44.3 to 40.0 the actual data was a shocking dive to 25.4.
The Pound Sterling to Euro exchange rate hit a low on Tuesday of 1.2482.
Wednesday’s economic calendar is bursting with highly influential, market moving data publications. The Bank of England is set to publish the minutes from the most recent monetary policy meeting. Although the minutes will be unlikely to reveal any new information regarding the BoE’s stance on monetary policy, it will be of interest to see whether the policymakers were unionised in their decisions or if there were dissenters.
The Euro will be subject to change after the European Central Bank board member Yves Mersch participates via a teleconference in the Joint Central Bank Seminar on Collateral and Liquidity Issues.
Both the Pound and the Euro may gain a little strength on Wednesday off the back of cooling demand for the US Dollar as traders await the Federal Reserve’s decision on interest rates.
