The euro strengthened against the pound yesterday as German IFO Business Climate showed an uptick in fortunes for the region’s most dominant economy.

This lends more weight to the view expressed in last Friday’s ‘Weekend Note’ that we are due to see more downside than upside pressure on GBPEUR over the coming month.

On a day of dollar heavy data it was unsurprising to see the greenback particularly volatile. US GDP was reappraised lower on a QOQ basis leading the dollar to sell off heavily in the afternoon session especially against the Japanese Yen. Richmond manufacturing PMI was also sloppy as it fell to 1 against a consensus view of 8.

The minutes from the most recent of Fed meetings have also weakened the dollar and allowed equity market futures to advance after a day of declines. The minutes were more dovish than had been previously expected leading to the idea that we will see lower rates in the US for longer.

UK GDP is reappraised today at 09.30. This is of course the GDP figure that shocked every economist in the city and every politician in Westminster as it was so far away from expectations. The UK is still in a recession and the market only expects the GDP figure to rise to -0.3% from -0.4%. A failure to do this would see GBP decline further and vice versa. Other data to be mindful of today includes CBI industrial trends at 11.00 while US Housing Starts and US CPI is due at 13.30.

Oh and congrats to South Africa for exiting recession.

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