Pound makes gains against the euro

The pound strengthened against the euro yesterday, finishing the day at 1.1187.

• In early trading yesterday the pound strengthened against the euro as stronger-than-forecast data released in the UK fanned demand for sterling.
  
• Figures released by the British Retail Consortium showed a 6.3% month-on-month rise in value of sales in shops for April, following increases of 0.1% in February and 0.6% in March.
  
• In addition, stronger-than-expected UK manufacturing and industrial data also improved investor appetite for sterling. Month-on-Month Industrial Production registered at -0.6%, better than the -0.7% forecasted, while Month-on-Month Manufacturing Production came in at -0.1%, up from -0.9% in March. Although the latter represented the biggest quarterly fall in UK production since records began in 1948, investors took it as an encouraging sign that the pace of the UK’s recession may be easing.
  
• However, the pound’s gains were capped to some extent after President of the European Central Bank Jean-Claude Trichet’s comments at a press conference on Monday, where he said policymakers could see the first signs of an economic recovery in the eurozone. Nevertheless, sterling went into lunch well up against the single currency.
  
• However, the surprise announcement of UK unemployment data yesterday afternoon after the Office of National Statistics accidentally released them meant sterling lost some steam in late trading. The figures showed that the number of people out of work in the UK rose to 2.22 million in the first quarter of 2009, taking the total jobless rate to 7.1%. This was the worst unemployment figure since 1996. Also, benefit claimants in April rose 57,100 to 1.51 million.
  
• Nevertheless, sterling strengthened on the day against the single currency as investors, buoyed by the positive data released early in the day, remained confident an economic recovery in the UK may not be too far off.
  
• In trading so far today sterling has pared some of yesterday’s gains, as caution ahead of today’s Bank of England Quarterly Inflation Report, released at 10.30 BST, encouraged some investors to book profits. There are no major announcements due in the eurozone today.