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Posted May 29th, 2013 by Charles Purdy

Europe’s largest economy starts to slow | Smart Daily Currency Note

GBP/EUR – 1.1696

Sterling held its own after the bank holiday apart from against a well-performing US dollar yesterday afternoon. Though the UK currency fell against its American counterpart following strong US consumer confidence data, sterling steadily extended it’s rebound from last week against most of it’s major peers as expectation increases that the Bank of England will gradually move away from it’s quantitative easing cycle. As reports throughout the week are forecast to describe a further extension of credit for the private sector as well as rising house prices, sterling could be supported approaching the Bank of England’s interest rate decision in just over a week. If more central bank officials move towards supporting a reduction in Britain’s asset-purchasing programme, the recently fragile currency has the potential to outperform in this quarter. With Confederation of British Industry sales data emerging today as well as word from one of the members of the Monetary Policy Committee, stay in touch to monitor progress throughout the week.

German import data held back the euro yesterday as figures indicated that demand in Europe’s largest economy is slowing, whilst a French consumer confidence survey detailed another drop in the wake of France’s government reforming labour laws earlier in the month in an attempt to stop a concerning rise in unemployment. Mixed policy signals also continue to emerge from Europe, with one central bank member yesterday speaking out that interest rates could be cut further if needed whilst others are concerned of the impact negative interest rates could have on periphery economies. Youth unemployment still remains a major issue, and the single currency may struggle to hold it’s ground before the European Central Bank decision on interest rates on June the 6th. As the ECB presses on into uncharted territory and governments within the union continue to rely heavily on monetary policy, call in to Smart today for price movements and market reactions.

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