The Eurodollar rallied against the pound yesterday following the release of solid German wholesale price index data and the narrowing of France’s trade deficit. The UK’s CB leading economic index data for January was almost unaltered from the prior month’s reading. There were no other major economic releases yesterday. Overall, the EUR/GBP pair rallied from a low of 0.8360 to a high of 0.8424 in the last 24 hours.
According to the German statistical agency Destatis, the country’s wholesale price index increased 1.70% m-o-m in February, following an increase of 2.30% in the prior month and almost double the 0.90% rise anticipated by economists. The changes related to the Russia-Ukraine war are not included in the reported data.
On a y-o-y basis, the wholesale price index grew 16.60% in February 2022.
The increase in the wholesale price index was led by a rise in the prices of raw materials and intermediate products. Specifically, the price of mineral products surged 43.60% y-o-y in February. Also, waste and scrap jumped 46%. Likewise, saw timber and metals and metal ores posted an increase of 44% and 43.40%, respectively.
According to the French Ministry for the Economy and Finance, the country’s trade deficit narrowed to €8.03 billion in January, from €11.39 billion) the largest gap since 1970) in the earlier month and bettered the €9.89 billion deficit anticipated by economists.
Exports increased 6.90% m-o-m to a historical high of €47.27 billion, primarily aided by a 3.80% increase in industrial products. Also, transport materials posted a 23.40% growth. Additionally, computer, electronics, electrical & mechanical equipment posted a rise of 5.60%. During the same period, imports fell by 0.60% to €55.31 billion.
In the UK, the Conference Board reported that the leading economic index, which reflects the direction of the economy, has increased 0.20% m-o-m in January, following an increase of 0.10% in the prior month.
Correspondingly, the index reading rose to 82.60.
The index is computed by combining the reading of 7 economic indicators associated with production, fresh orders, consumer confidence, stock prices, and interest rate spreads.
Furthermore, the Conference Board Coincident Economic Index (CEI) rose by 0.30% to 104.2 in January.
The robust German wholesale price index data and the narrowing of the French trade deficit are expected to keep the EUR/GBP pair slightly bullish in the short term.
The historical price chart reveals that the EUR/GBP pair is rising after testing the support at 0.8360. The next resistance is anticipated only near 0.8470. Additionally, the currency pair is trading above its 50-day moving average, while the MACD indicator has a positive reading. We are expecting the currency pair to stay in an uptrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
