Market Analysis – EURGBP
During this morning Asian Session the Euro is increasing considerably against the Pound. The currency pair has already gained 25 pips till now and has seen higher levels of momentum as the price approaches the previous resistance level at 0.8615. The price movement the day before also ended in favour of the Euro, but did see price movement throughout the day in favour of the Pound. The first part of the day saw the currency continue its downward trend updating recent lows, however, the price action changed when we entered the US Session and corrected back in favour of the Euro.
When looking at the currencies individually, we can see the Euro Currency Index is increasing considerably but did slightly decline the day before, mainly due to the US Dollar’s Strength. This morning we can see the Euro is increasing against its main competitors including the US Dollar, the Yen and Australian Dollar. The British Pound is increasing in value against the US Dollar as if the Euro, but is declining against the Yen and Canadian Dollar.
European investors are focused on the publication of the April data on the consumer price index in Germany and the March statistics on the volume of industrial production in the Eurozone countries. The consumer price index in Germany rose from 0.5% to 0.7% MoM, and from 1.7% to 2.0% YoY. The increase in inflation was expected by the market as the recovery of the German economy began.
The data on the volume of industrial production in March was worse than the forecasts of investors. It grew by only 0.1% instead of 0.7% MoM, and by 10.9% instead of the expected 11.6% YoY. Nevertheless, the growth of the indicator was still significant. Representatives of the European Commission raised the forecast for the strengthening of the Eurozone economy to 4.3% for this year, and 4.4% for the next year. Officials expect a sharp recovery in GDP as the number of vaccinations increases and quarantine restrictions are lifted. The positive dynamics will be due to an increase in private consumption, investment, and demand for European goods from external partners.
Looking at the main economic indicators for the Eurozone, we can see the Inflation rate is continuing to recover reaching 1.6%, a much healthier figure compared to the minus figures seen towards the end of last year. The unemployment rate is also attempting to recover, dropping to 8.1%. The market is eager to see whether the figures within the EU will continue to improve going forward.
British investors are focused on the publication of preliminary data on the GDP figure for the first quarter and March statistics on industrial production. The UK economy contracted by 1.5% QoQ, better than the market’s expectations of 1.6%, and declined by 6.1% YoY in line with forecasts. Pressure on the GDP was exerted by quarantine measures introduced in the country in the first quarter of this year. However, at present, they are gradually being cancelled, and experts expect significant GDP growth for the second quarter.
In the UK, Industrial production in March rose more than investors expected. The figure rose by 1.8% instead of 1.0% MoM, and by 3.6% instead of 2.8% YoY, which indicates a gradual recovery of the British economy after the reduction of quarantine restrictions. Today, British Chancellor, Rishi Sunak, expressed hope that this year domestic consumption in the country will grow without the use of new government support schemes to stimulate spending.