Pound to euro exchange rate: Sterling RECOVERS after UK data – but could be short-lived

The pound dropped earlier last week, due to the uncertainty surrounding Brexit negotiations.

Following the resignation of Priti Patel as well as Sir Michael Fallon earlier this month, it also caused concern following the crumbling of Theresa May’s cabinet.

However, it appears that positive UK data has helped the pound to recover, with the exchange rate hitting €1.129.

This follows a slight drop from when the pound reached highs of €1.132 last week.

The UK data shows the industrial output grew at it’s fastest pace in September for the whole year.

The Office for National Statistics (ONS) released figures showing a 0.7 per cent increase in production.

It also showed a narrowing of the UK’s trade deficit in goods and services, another positive outcome.

New data surround the UK’s inflation could also help the exchange rate, depending on the results.

Inflation data is expected to show a pressure on household spending.

Wage growth has struggled to increase with inflation, with estimates of an increase to 3.1 per cent, up from 3 per cent in September.

Any figures above 3 per cent mean Mark Carney, Governor of the Bank of England, must write to the chancellor to explain why this is.

With the UK’s target of 2 per cent, it isn’t looking positive.

Laura Parsons, currency analyst at TorFx explained what this could mean for the following few days.

She said: “With some high-profile UK data on the cards this week, the GBP/EUR exchange rate could be gearing up for a volatile few days. 

“At the close of last week Sterling received a modest boost from some upbeat UK data, but concerns of a leadership challenge in the Conservative party limited the pound’s potential. 

“GBP/EUR remains around the €1.125 level but could climb tomorrow if the UK’s latest inflation data shows an increase in consumer price pressures.”

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