The pound has rallied sharply against the Euro after UK Industrial and Manufacturing Production rose in February according to official statistics. The data was a shot in the arm for sterling and reflects my view that the pound has been undervalued previously. Friday sees the latest German CPI data and if this is weak we could see the Euro coming under further pressure- whilst the ECB are doing a good job of maintaining confidence, I cannot see how continued low inflation can be left. Whilst official unemployment figures for Europe have showed the jobless rate coming down recently, there are certain areas like Greece and Italy where it is actually still increasing, so the divide between the struggling countries and Nordic ones is increasing. If Germany wobbles, then it is likely the wider European figures are likely to be worse. To this end if you are holding Euro I may be inclined to sell them soon.
The USD has made some headway against the Euro but I suspect investors are waiting for the outcome of the Fed Reserve Minutes published tomorrow evening. Whilst it seems to have been weak for a very long time, I think the greenback will slowly start making headway against an under fire Euro as the months run on.
On the Aussie Dollar side, the recent trade deal with Japan has provided another boost to the Aussie, reinforcing a very positive run after the RBA have made it clear further rate cuts are unlikely. We do have unemployment figures in the early hours of Thursday morning so this could also have a bearing on rates but I am inclined to think the current levels to sell AUD and buy Euro are beginning to look very attractive, particularly as they broke the 1.50 resistance the other week, and may break even lower if both data releases come out as I expect (Aussie jobs ok, German CPI low).
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