British Pound Edges Lower against US Dollar (GBP/USD), Trims Euro Gain (GBP/EUR)
Earlier this week the British Pound rallied against almost all of its peers in response to a stronger-than-expected UK services report.
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As the services sector accounts for around 70 per cent of UK growth, the surprisingly upbeat report gave the nation’s economic outlook a rosy glow and lifted the Pound.
Sterling achieved a nine-week high against the Euro and brushed a five and a half year against the US Dollar prior to the Bank of England’s rate decision.
On Thursday the BoE opted to refrain from adjusting fiscal policy or interest rates. As the decision was expected and already priced into the market the Pound experienced minimal movement in the aftermath of its announcement.
However, the GBP/EUR pairing struck a fresh 2 ½ month high after the European Central Bank indicated that it plans to reconsider policy in June.
The Euro broadly weakened after ECB chief Mario Draghi asserted that the Governing Council was onboard with the idea of introducing additional stimulus next month.
The common currency came under additional pressure on Friday after trade figures from Germany, the Eurozone’s largest economy, fell wildly short of forecasts.
However, as the European session progressed the Pound trimmed gains against both the Euro and US Dollar.
The US Dollar was supported against its British peer by Thursday’s better-than-expected US initial jobless claims report and the hope that today’s US JOLT’s jobs data will also deliver a positive surprise.
Meanwhile, the Pound slipped against the Euro following the release of a mixed bag of UK data.
UK industrial production fell by 0.1 per cent in March month-on-month following a negatively revised increase of 0.8 per cent in February. Economists had expected a decline of 0.2 per cent.
Manufacturing production was up 0.5 per cent in March on the month. The increase was more than the gain of 0.3 per cent expected but still marked an easing in production from February’s 1.0 per cent gain.
Construction output dropped by a seasonally adjusted 1.0 per cent in March, month-on-month. A monthly increase of 0.6 per cent was envisaged.
Separate figures also showed that the UK’s goods trade deficit narrowed from 8.75 billion Pounds in February to 8.48 billion Pounds in March as exports climbed 4.9 per cent and imports increased by 2.8 per cent.
After the reports were released Sterling softened slightly against the ‘Greenback’ and Euro.
Before the weekend additional Pound movement could occur in response to the UK NIESR GDP estimate for April. An upbeat report could help the British currency recoup losses before local markets close.
The British Pound is currently trading against the Euro in the region of 1.2239 and trading against the US Dollar in the region of 1.6908