GBP/EUR up on contrasting data

The GBP/EUR rate rose overnight on the back of two factors. Firstly, German industrial production data showed a 1.6% contraction in the year to January, the worst reading since April 2023, on the eighth straight month of contractions in a row. At a time when the European Central Bank is mulling over whether it needs to start reducing the cost of borrowing, if this continuing contraction within the largest European economy, isn’t a concern, I don’t know what should be. The other factor in this exchange rate is an improved UK housing market report from The Halifax. They report a 2.5% annual rise in the average house price, the 4th monthly improvement on the trot and the strongest reading since November 2022. We will get another take on the UK housing market when the Royal Institution of Chartered Surveyors publish their house price balance index overnight tonight. That is also expected to show a healthy improvement in sentiment and should reinforce the confidence being shown in the value of the pound. Wednesday is definitely light on data, so traders are likely to fall back on central bank speculation for their trading decisions.

CAD knocked by construction data

Canada posted the worst month of building permit issuance since June 2023 in the month of December. A drop of 14% was completely at odds with the market forecast of 1.8% increase. The building permit data is considered to be a leading indicator of the state of the Canadian property market, so it is not surprising we have seen some weakness in the Canadian dollar in the last 24 hours. I suspect the loonie would be weaker were not for an improvement in the Ivey purchasing managers index. Nonetheless, the GBP/CAD rate is back above CAD 1.7020, a rise of 3/4 of a cent from yesterday’s lows. It must be said that part of that rise is due to a recovery in the value of the pound.