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FXstreet.com (London) - EUR/GBP fell on the release of numbers from German economics think tank Zew before regaining some ground.

Zew declines unexpectedly

The January Zew index fell to 61.7, from 62.0 in December – the first drop since July 2013. Expectations were for a strengthening to 64.0.

Despite the drop in the headline number, the current assessment component jumped to 41.2, from 32.4 in December reflecting increased consumer confidence thanks to a healthy labour market and growth in real wages.

Earlier this month Germany released trade balance figures showing that its trade deficit had widened to a near record USD24 billion in November on declining domestic consumption – a worry for European countries dependent on German demand.

UK unemployment and BoE minutes in focus

With a light schedule for the rest of the session, focus for the pair will be on tomorrow’s UK data and the release of Bank of England monetary policy committee minutes from the 10 January meeting.

UK unemployment numbers are expected to see a further decline to 7.2 percent, quickly closing in on BoE governor Mark Carney’s threshold for a hike in the record-low base rate from 0.5 percent.

Carney has been consistent in stating that the 7.0 percent level is a threshold and not a trigger. It has been anticipated that he will allow the declines in unemployment numbers to run further, however the BoE minutes may give clues as to whether the BoE plans to formally move the goal posts for a rate hike or whether it will let unemployment declines run on a discretionary basis and talk down any early rate hike speculation.

Both the jobs numbers and the MPC minutes will be released at 9:30 GMT, meaning that a drop in unemployment will amplify any language surrounding the BoE’s 7.0 threshold.

EUR/GBP regains some ground

EUR/GBP has clawed back some ground from its session lows at GBP0.8226 immediately following the Zew release. The pair is currently trading at GBP0.8226, down 0.13 percent on the day but retracing earlier losses.
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