Eurozone Growth far from impressive (Daniel Johnson)

GBP weakens due to BOE monetary policy outlook

The Euro has made gains of late against Sterling, this is more down to GBP weakness than Euro strength. A host of poor data from the UK put a halt to any plans from the Bank of England (BOE) to raise rates this month. There was a huge fall in retail sales, figures were predicted to arrive at – 0.5%, but landed at – 1.2%. There was also a drop in inflation, it now sits below average wage growth and GDP fell to it’s lowest in five years.  There is little reason to justify a rate hike this year. GBP/EUR remains stuck between 1.13-1.15. 1.16 has not been breached for nearly 12 months.

Having said that, if I was selling Euros I would not hang on for further gains. The main catalyst for the Pound’s weakness is lack of clarity on Brexit. It  is important to remember GBP/EUR was 1.40 + pre-Brexit and we have not witnessed 1.12 despite the appalling run of data from the UK.

Growth is also under par in the bloc. First quarter data is well below expectations. It is looking likely that this years growth will fall significantly below predictions.

If you are buying the Euro short term I would be aiming to move if interbank hits 1.1430-1.1450.

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