The Pound fell across the board yesterday while the Euro made gains on the back of U.K. and German industrial production data. German industrial production rose sharply in May posting a y/y figure of 2.6%, analysts had expected production to fall. In the U.K. industrial production rose as well but by a smaller margin, production rose to 0.7% in May. Additional weakness for the Pound came from the surprise release of Halifax house price data that showed prices falling to 6.3% from 6.9% m/m.
The Bank of England’s interest rate announcement capped Sterling’s losses and allowed the currency to regain its composure. The central bank left rate on hold at 0.5% and kept the level of the £200bln asset purchase scheme unchanged. No statement was issued with the announcement.
The European Central Bank kept interest rates unchanged at 1.0% as expected. In the follow up press conference ECB President Trichet maintained his fairly hawkish stance saying the governing council still considers current interest rates as appropriate. He further went on to say that inflation expectations remained firmly anchored and that recent economic indicators are pointing to a strengthening in economic activity in the last quarter. The ECB also welcomed the announcement from the E.U. that stress tests would be carried out on E.U. financial institutions. Trichet’s comments along with an improvement in US jobs data pushed the euro higher and weighed on the dollar against most of the major crosses.
German inflation data released this morning came out in line with expectation and has had no lasting effect on the Euro. There is no further E.U. or U.S. data scheduled for today. In the U.K. markets await the release of U.K. trade balance and PPI inflation data.
Live IB rates at 9.33 am UK
GBP – EURO 1.1959
GBP - USD 1.518
GBP- AUD 1.735
EURO - USD 1.269
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Update By Baydonhillfx
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