The currency markets gained some direction from data releases Tuesday morning. Upbeat European data supported the euro. The British pound, however, lost ground as inflation missed expectations.
By 1100 BST, the euro was trading up at $1.1719 from $1.166 ahead of some key data releases. The British pound, meanwhile, had slipped to $1.390 from $1.3118 ahead of the CPI publication.
Data takes the lead
While political news has been a dominant factor in currency movements of late, economic data most definitely took the lead, early Tuesday.
Earlier, third-quarter German GDP was reported to have expanded 0.8% from the second quarter, above estimates. That pace of growth supported expansion across the broader euro zone. The preliminary Q3 euro zone GDP release showed growth held steady from the second quarter at 0.6%.
The German ZEW survey followed, reporting an increase in the economic sentiment measure to 18.7. While that was below expectations, it was still up from October’s 17.6.
All three sets of data gave the euro a boost as they prove supportive of the European Central Bank’s decision to begin withdrawing its asset purchase scheme in 2018.
British pound loses out
The UK’s CPI data, however, helped sink sterling against the US dollar. The Office for National Statistics (ONS) said the cost of living rose at a rate of 3% in October compared with a year earlier. That was unchanged from September’s rate and below expectations.
The lower than anticipated rate of inflation suggest inflation may not rise as high as investors and possibly even the Bank of England (BOE), expect. And, if inflation remains lower, the BOE is under less pressure to raise interest rates.
"Overall, the latest inflation figures show that the depreciation in sterling is still causing prices to rise faster than in recent years,” said Azad Zangana, Schroders Senior European Economist, in a research note.
“However, this appears to be close to an end. Data from producers show that both input and output prices peaked months ago, which should mean that we are close to a peak in CPI inflation,” Zangana added.