• Lack of sterling data weighs on currency
  • Euro rallies on German coalition hopes
  • US CPI inflation expected to fall

Sterling volatile following lack of data

The pound posted a mixed performance on Thursday, gaining over a quarter of a percent against the dollar whilst losing just shy of four-tenths of a percent against the euro. A lack of economic data releases left the pound vulnerable to wider markets. However, uncertainty in the US allowed the currency to stretch its legs against the greenback.

Following on from yesterday, the pound yet again has no economic releases to provide the currency with support. With dollar investors uncertain and euro investor sentiment on the rise, we could well see the pound continue to be dictated by its wider market counterparts.

Euro rallies on German coalition breakthrough

The euro continued to perform well yesterday, finishing the day up 0.8% against the dollar and 0.4% against the pound. Hawkish ECB minutes left investors feeling bullish towards the single currency after the Central Bank hinted that it could be gearing up to trim its massive monetary stimulus.

This morning we have had the release of French CPI inflation numbers which painted a mixed picture of the French economic recovery. Whilst the monthly figure rose by 0.3% as expected, a 0.1% fall on the annualised index pointed to a less favourable long term outlook. Despite this, the key focus for the morning has been the announcement that German Chancellor Angela Merkel's conservatives and rival Social Democrats reached a breakthrough in coalition talks. Following the announcement, the currency has risen to a three-year high.

Dollar slips on wider market pressure

The greenback struggled yesterday, losing a quarter of a percent against the pound and over three quarters of a percent against the euro. A higher-than-expected initial jobless claims number combined with disappointing producer prices put the currency on the back foot.

Today, we have the release of CPI inflation as well as US retail sales. With CPI inflation expected to fall 0.2% and retail sales set to fall 0.4%, we could see yet more pressure applied to the currency. This has already set the currency on the back foot, trading down a further 0.7% against the euro and half a percent against the pound.

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