UK inflation and German ZEW are good focal points for investors today
The pound to euro exchange rate is under pressure ahead of today's key data events - the UK inflation data release and the ZEW survey of German economic sentiment.
GBP-EUR is 0.44 pct in the red at 1.1710.
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As mentioned, UK inflation and German ZEW are good focal points for investors today. [UPDATE: Please see our live coverage for sterling's reaction to today's UK inflation data.]
Analysts at UniCredit join the broader camp who are expecting inflation to have increased over the course of the past month - a pro-sterling development.
Jeremy Cook at WorldFirst tells us:
"Inflation in the UK has remained above the Bank of England’s targets consistently through the crisis and has not retreated lower like it has in the US or Eurozone.
"Higher readings of CPI through the summer are likely to remain something that stymies any efforts by the Bank of England’s new Governor to stimulate the economy. We forecast at the beginning of the year that the biggest risk to sterling over the course of 2013 was the appointment of Mark Carney.
"Osborne was keen to emphasise in this year’s Budget that help for the UK economy would not come from government but instead from ‘monetary activism’ from the Bank of England. Luckily enough for GBP the improvement in data over the course of the past month or so has allowed the MPC to rein in its determination to further expand asset purchases.
"The main argument has to be whether, should we need it, does Carney follow the Japanese way of doing things or instead decides to act like the Fed and use ‘forward guidance’ that should help smooth and configure rate expectations further out without a change in the Bank’s inflation target. Whether this is tied to a growth expectation or an improvement in unemployment will remain to be seen.
"CPI in the UK is expected to increase to 2.6% from 2.4% on a slight increase in oil prices of late.
"Also set to rise is the ZEW survey of German economic sentiment following a dip caused by concerns over the handling of the Cypriot situation. Despite Bundesbank protestations that the German economy is not performing as it should do the market is looking for an healthy improvement at 10am."