The pound consolidated against the euro during the overnight trade on worries that weak performance of UK economy would pressure the Bank of England to further ease its monetary policy. Market participants believe that sterling’s safe haven appeal against the euro will disappear should we see the BoE expand its quantitative easing program. British economy contracted in the fourth quarter of 2011 and is projected to grow less that previously anticipated in 2012. BoE policymaker Adam Posen said on February 02 that there is a reason to buy additional 75 billion pounds of government bonds beyond the QE program that ended last month. Overnight, the British Retail Consortium (BRC) reported that UK retailers had their second worst January on record as the weaker economic outlook prompted consumers to cut spending. The BRC said that sales at the stores opened at least one year, fell by 0.3% from year earlier. With empty economic calendar scheduled for today expect for the pound to remain driven by market risk aversion.
The euro gained against its major rivals during the early morning session before Greek PM start second round of negotiations with international creditors in Athens today. Mr Papademos met with representatives from the EU, ECB and the IMF to continue talks on possible spending cuts that would determine whether Greece can stick to its austerity plan in order to remain in the euro area. Looking to the economic calendar for today, German and Dutch industrial production figures headline the economic calendar, with expectations for the numbers to have improved in December.
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