After a strong start, the pound lost ground to the euro yesterday in the wake of strong German data

The pound reached a near two-month high in early trading yesterday, but the euro eroded losses following positive data, with the pair closing marginally down at 1.1171.

  • The euro found support yesterday after government data showed German industrial output rose more than economists had forecast as factories expanded production to meet export demand.
  • Figures showed a larger than expected 2.7% rise in German industrial production, exceeding market forecasts of a 1.2%.
  • In addition, data revealed that German exports jumped by 3.8% in September, which underscores Germany’s ability to export even in a strong euro environment and undermines the view of some eurozone finance ministers that euro strength is impeding the ability to export.
  • Sterling has come under selling pressure this morning after Fitch Ratings agency said that the UK rating faces risks of losing its AAA status because the country needs “the largest budget adjustment.” The pound is currently trading half a percent down, hovering just above 1.11.
  • Investors are awaiting an economic sentiment survey from Germany, released at 10:00, which is forecast to show a further fall this month and could put pressure on the single currency.