Pound makes gains against the euro after German GDP data

The pound strengthened against the single currency yesterday, finishing the day at 1.1169.

• In early trading yesterday the pound weakened against the single currency, as the gloomy Bank of England Quarterly Inflation Report weighed on investors’ minds. Governor Mervyn King’s forecast that the UK economy’s recovery will be “slow and protracted” did little to ease sterling’s early plight against the euro.
  
• The BoE expects inflation to fall to 0.5 percent before rising to just above 1 percent in two years' time, while the economy is seen recovering at a slower pace than previously thought.
  
• Sterling was also under early pressure as stock markets were sluggish, although the FTSE 100 eventually finished the day 0.7% up, with a recovery in bank stocks benefiting the pound.
  
• However, in early trading today the euro is under selling pressure following Germany releasing worse than expected GDP data. The German growth figures showed their economy contracted by 3.8% in the first quarter, and by 6.9% on an annualised basis.
  
• With no major announcements due in the UK today, investors will turn their attention to the eurozone GDP figures released at 10.00 BST.