Sterling saw mixed fortunes against the euro and US dollar on Tuesday as the markets reacted to poor inflation data from the Eurozone. There was little reaction to the release of the latest UK current account balance and economic growth figures, with better-than-expected growth countered by an increased deficit. More significant movement was seen later in the morning as core inflation throughout the Eurozone fell to 0.7% compared to the 0.9% seen a year ago. With record low interest rates in the Eurozone failing to boost price growth, sterling rose to a fresh 2-year high against the euro. Sterling struggled against the US dollar, falling to a two-week low as the Bank of England (BoE) highlighted concerns over a lack in wage growth.
Today we see the first Purchasing Managers’ Index (PMI) data of the week, which comes from the manufacturing industry. Despite slackening off over the past two months, this figure has shown solid growth over the past year and so should continue to expand. Any surprises will more than likely affect sterling strength.