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GBP/EUR could climb on UK inflation, ZEW sentiment surveys

business-articlesGBP/EUR could climb on UK inflation, ZEW sentiment surveys
  • GBP lower on Brexit uncertainty
  • UK inflation data ahead
  • EUR could fall if ZEW surveys reveal declining sentiment 
Brexit negotiation concerns leave pound weaker

Prime Minister Theresa May might be optimistic that last week’s exit deal marked a turning point in negotiations, but that optimism didn’t translate into gains for Sterling.

The British currency spent the start of the week struggling against the majors amid concerns that the start of trade talks could still be some time off.

In May’s Commons statement, she claimed that the Government was still working towards a trade deal being agreed by next autumn.

The PM was quoted as saying; ‘We have always said that we will be working to negotiate our full agreement in terms of the future relationship that we have with the European Union. Of course, legally it won’t be possible for them to sign up to that agreement until after we have left the European Union and we’ve become a third county. While we are in the EU, it’s not possible to [be] a signatory of that agreement.

But the pieces of work that will now go forward will be the details of the implementation period, the details of the withdrawal agreement, which will have to go through certain parliamentary processes in European member states ... and also the future relationship that we will have in trade terms and security terms with the European Union.’

UK inflation expected to print at 3.0%

The pound could advance on rivals like the euro later today if the UK’s latest inflation figures come in above forecast.

As it stands, the annual rate of inflation is expected to hold at 3.0%.

According to Lloyds; ‘For November, while higher energy and food prices point to upside risks, some signs of an easing in goods price inflation should provide an offset. On balance, we expect headline CPI inflation to be unchanged at 3.0%. An upside surprise will lead to the release of an open letter to the Chancellor alongside Thursday’s BoE interest rate decision.’

However, as a higher-than-expected reading could pressure the Bank of England (BoE) into reconsidering its current stance on the future path of interest rates, an upward surprise could give Sterling a boost.

Sliding sentiment could dent EUR

The euro could come under pressure later today as ZEW publishes its economic sentiment surveys for Germany and the Eurozone.
The gauge for Germany is expected to dip from 18.7 to 18.0, and the nation’s current situation measure is also forecast to ease lower in December.
If the Eurozone index also falls, the euro could be pressured lower ahead of Thursday’s European Central Bank (ECB) interest rate decision.
Upcoming Data
Tuesday, 12 December, 2017
01:30               AU Business Confidence (Nov)
09:30               UK Inflation (Nov)
10:00               DE ZEW Economic Sentiment (Dec)
13:30               US PPI (Nov)
23:30               AU Unemployment Rate (Nov)
Wednesday, 13th December 2017
07:00              EUR German CPI
09:30               UK Employment change
09:30               UK Average weekly earnings
13:30               US Consumer Price Index (NOV)
19:00               FOMC rate decision
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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