Sterling remains supported
Sterling remained supported on Wednesday, holding its ground against most key currencies in the absence of any major news flow or economic data.
Despite the lack of economic data, GBP moved to month-highs against EUR to 1.1927 and moved away from multi month-lows against USD, rising to 1.2988.
It is likely that the recent lift in sterling is attributed to ongoing expectations for an increase in government spending at next months budget statement. The announcement of High Speed 2 (HS2) has hinted to investors that the government may be looking to loosen their purse strings.
In addition to this, expectations of an improvement in UK economic growth following the general election has added a boost to GBP. Earlier in the week, GDP figures showed stagnation in the UK economy as growth for Q4 remained at 0%. Despite a flat reading, it beat expectations of a 0.1% quarter on quarter fall. Investors anticipate that with the pick up in business confidence, Q1 of 2020 is on track to be much improved.
The euro continued it’s depreciation against both GBP and USD on Wednesday. Fears of a recession and that the Coronavirus could hinder growth caused the single currency to weaken.
Industrial production slowed for the second consecutive year, falling below expectations to read -4.1%.
07:00 – EUR: Harmonized Index of Consumer Prices (YoY) Consensus 1.6% Previous 1.6%.
13:30 – USD: Consumer Price Index Ex Food & Energy (YoY) consensus 2.2% previous 2.3%.
13:30 – USD: Consumer Price Index Ex Food & Energy (MoM) consensus 0.2% previous 0.1%.
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