Forex: EUR/GBP: Eurozone’s Current Account posts higher surplus; UK Retail Sales up 0.3%

on Dec 19, 2013
Updated: Oct 21, 2019
Listen Thursday, December 19th:_ The EUR/GBP yesterday logged its biggest loss since 25 February, down 1.09 percent at the day’s closing price of 0.8349. Initially, the downtick was induced by the UK Unemployment Rate falling unexpectedly to 7.4 percent in October from 7.6, the UK claimant count change showing a decrease by 36,700 in November and the Bank of England releasing a report on its monetary policy meeting from 5 December. Subsequently, the pair was additionally sold off following the Fed’s decision to change the amount of its economic stimulus to $75 billion per month from $85 billion and to keep interest rates within the range zero to 0.25 percent.

The BoE minutes report said that inflation was decreasing, but medium-term expectations remained well anchored, economic growth was picking up and the labour market was strong. The report also stated that the high pound would be a problem.
The BoE said that the UK economy would have to rebalance to external demand from domestic demand in order the recovery to be self-sustaining. But, the bank said that “any further substantial appreciation of sterling would pose additional risks to the balance of demand growth and to the recovery.” The bank added that the pound’s strength would cause “disinflationary pressure” and since inflation is currently at 2.1 percent, right above the BoE’s two percent target, they were likely to be watching the currency closely.

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The finance ministers of the European Union (EU) countries yesterday reached an agreement on policy to deal with failing banks, ahead of today’s EU Economic Summit in Brussels, where a range of global economic issues, including the bank failure plan, and economic and monetary union will be discussed.

Ministers agreed to set up a rescue fund of €55 billion, financed by the European financial sector over the next 10 years, and also supported the establishment of an agency which will make decisions for failed banks. They also agreed on the issue of cost sharing. The discussion will now pass to the European Parliament, where lawmakers have expressed opposition to the removal of some aspects of the process. The idea of a banking union arose in June 2012, after European regulators failed to prevent the effects of the financial crisis and is meant to protect the financial system from new shocks.

It was reported today that the Current Account surplus of the euro area expanded in October after reporting a contraction in September. The Current Account balance, which is an indicator of the international financial situation of a country, has reported positive balance of €21.8 billion from €14.9 billion surplus in September. The prior figure was revised up from €13.7 billion surplus. The trade of goods rose to €17 billion in October from €13.7 billion a month earlier indicating that exports were more than imports. Less developed countries in the region have increased their exports using it as their main source of growth after stringent measures to curb costs put pressure on imports at the national level.

UK Retail Sales m/m grew by 0.3 percent in November, matching expectations. The prior period showed a 0.9 percent decline (revised down from 0.7 percent drop).
At press time the price is trading at 0.8354, after hitting a two-week low at 0.8338.
Resistances: 0.8360, 0.8385 and 0.8400.
Supports: 0.8340, 0.8325 and 0.8300.
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