Pound resurgent as Eurozone data unnerves markets

The pound started off the week on a stable footing yesterday against most of the majors as a lack of UK data or political developments left Sterling to drift slightly higher.

Sterling starts off today on higher ground, with GBP/EUR up slightly at €1.1570, GBP/USD also up at $1.2942 and GBP/CAD higher at C$1.7432, while GBP/AUD and GBP/NZD are both up around 0.2% at AU$1.8383 and NZ$1.9426 respectively.

Focus today is on European data with inflation and growth figures coming out of Italy, Spain, France, Germany and the Eurozone as a whole.

What’s been happening?

Traders bought into the pound yesterday, causing it to rebound slightly from the losses seen last week.

However, Sterling gains were limited overall as concerns remained about UK political uncertainties surrounding Brexit.

The Conservative-Labour discussion to find a way forward on Brexit have been perceived as unsuccessful so far, and investors are also becoming more nervous about the prospect of next month’s upcoming EU elections, which could cause major UK political upsets.

Yesterday’s generally disappointing Eurozone data continued the trend of an ongoing slump in confidence and economic activity being brought about by the global growth slowdown and political woes.

Nevertheless, investors were hesitant to sell out of the euro as the weekend’s Spanish general election had the effect of reducing uncertainty in the political outlook instead of increasing it, which some analysts had feared would happen.

Meanwhile, prominent forecaster EY Item Club downgraded its UK growth projections for 2019 and 2020, limiting pound gains yesterday. This fresh warning that Brexit uncertainty could drag on the economy throughout the remainder of the year has left GBP traders with a headache once again.

What’s coming up?

Other than a speech by the Bank of England’s David Ramsden, there isn’t a lot to drive the pound today in terms of economic events.

On the other hand, today will be an influential session for euro investors with German unemployment and inflation data, French growth and inflation data, and Eurozone unemployment and growth data all likely to cause euro movement if they surprise one way or the other.

At the same time, we could see some movement in GBP/CAD later on as a range of economic data is due for release, including February’s GDP figures and industrial materials prices, topped off with a speech by Bank of Canada Governor Stephen Poloz, with investors keen to hear what – if any – hints he will be dropping about future monetary policy.

Finally, overnight we’ll get to see the latest New Zealand labour report, including the unemployment rate and employment change figures in Q1, the results of which could influence NZ central bank interest rate policy in the near term.