Sterling has had a pretty dismal start to the day this morning having had a simultaneous drop off against the Euro and the Greenback at 8:30am, with both pairs losing over half a cent in little over half an hour. Sterling has since levelled off and is currently holding against the Euro at 1.1637 and 1.5585 against the Dollar.
Earlier this morning we had UK housing data released by RICS which showed the Housing Price Balance dropped to -4% in January. Further UK data has just been released and isn’t too favourable either, with the UK Consumer Price Index remaining stagnant at 2.7%, and the Core Consumer Price Index falling marginally to 2.3% last month, down from 2.4%. The UK Producer Price Index met market consensus at 2.0% whilst UK PPI Core Output fell to 1.4% in January, capping off yet more negative data for the UK, something which seems to have become the norm since the turn of the year.
Sterling has continued to suffer on the back of consistently weak UK data and improved sentiment within the Euro Zone. Going forward the outlook doesn’t look any more promising for Sterling either. Long term charts for both GBP/USD and GBP/EUR indicate that risk is still to the downside with key resistance levels being potentially targeted at 1.5278 and 1.1223 respectively.
However, Sterling could well rebound should sentiment towards the Euro Zone begin to change, especially following the Pounds such severe and rapid losses over the last few weeks. With GDP figures due out across Europe on Thursday and Italian Prime Minister Elections drawing ever closer, potential for a decrease in the Euro remains significant. Furthermore, after the recent 18 month highs for the Euro against the Pound and the Dollar, the grumbles of European leaders with regards to the common currency’s current strength are becoming louder. This issue is also likely to be mentioned by ECB President Mario Draghi in his Speech today, which could well have an impact on GBP/EUR trading this afternoon.