The euro was able to rise against the pound for the very first time in more than five sessions last week which was boosted by strong euro zone factory results along with a weaker than expected manufacturing movements from the United Kingdom.
However, gains in the euro were also being utilised by some traders in order to make fresh bets against the currency coupled with the slowing inflation in the euro zone bloc having significantly increased their chances of policy loosening from the European Central Bank in the coming week.
Markit’s final Eurozone Manufacturing Purchasing Managers Index went up 54.0 during the previous month, signifying an earlier flash reading of 53.9 which was comfortably ahead of the last quarter’s 52.7 readings and the last time it was in a record high was way back over three years ago.
However the U.K. January manufacturing PMI readings were disappointingly on a 56.7 reading, falling short of the expectations of the predicted 57 level slipped from its previous record high of 57.3. This reluctantly saw some pare expectations of near-term rate tightening by the Bank of England.
Moreover, the euro rose 0.7 % to around 82.61 pence, continuing to clear of a one-year low of 81.68 pence struck just recently last month. Also with the euro falling last week after data revealed the Eurozone inflation slowed down to 0.7 % year-on-year last month which was much lower than the ECB’s predicted target of just under 2 % respectively.
As against the dollar, sterling was likewise down 0.5 % at $1.6360, trading at its lowest level since mid-January of this year. The pound struggled at a poor start in trading after this week’s U.K. data missing out on expectations according to analysts.
The week is heading towards a full-packed event risks which include several interest rate decisions alongside with prevailing key U.S. employment figures and data. Traders are keenly looking forward towards the ECB’s policy meeting last week, especially that the inflation figures have ignited speculations over a possible rate cut in the coming weeks.
Finally, the euro is likely to be traded heavily into the meeting and any further easing measures should lead to the downside momentum accelerating against the British pound and the U.S. dollar.