An impressive week for the pound has seen yet more multi year highs seen in GBP/EUR and a year high in GBP/USD. Analsyst at Danske Bank highlight that the stronger UK growth recovery might aid GBP/EUR to move towards 1.3888 in the long-term. They continued “the GBP has performed strongly so far in February appreciating more than 3% against both the EUR and the USD.” “Fundamentally, the recovery remains on track in the UK and we are still optimistic regarding the British economy. Today’s second release of Q4 GDP growth should confirm this view and show a solid growth of 0.5% q/q mainly driven by domestic demand and, in particular, private consumption.” “We expect GBP/EUR to rise further on a three to six months’ horizon targeting the cross at 1.3888 in 6M as a rate increase from the Bank of England is moving closer.
The single currency remains subdued near more than seven year lows against sterling after German consumer climate improved above estimates in February. The EUR/GBP pair traded flat at 0.7318 levels, retreating from more than seven year lows reached at 0.7309 levels earlier in the day. EUR/GBP was unmoved by upbeat Gfk German Consumer Climate data which showed that consumer spending improved in February to 9.7, beating expectation of a 9.6 reading and coming stronger than January’s reading of 9.3. Meanwhile, a generalised weakness in the EUR/GBP cross may persist ahead of a slew of economic releases from Euro area and the UK. Against the dollar we have seen some pull back for the euro as EUR/USD remains close to the $1.1350 level.
The dollar is looking to close out the month on the back foot as risk appetite continues to spread, sending global stock markets higher and reaching all time highs. This has seen investors sell the greenback which has dragged the currency down against both the pound and even the euro. At time of writing, EUR/USD was trading at the 1.1345 zone, little changed on the day. Against sterling we saw the buck fall to its lowest level this year as the pound continues to be bought on the back of a seem to be improving economy and confidence in the UK currency. The dollar is taking a breather as markets digest the Yellen testimony which continued Wednesday. Yesterday’s remarks were understood as the Fed is in no rush to hike rates.