EUR ignores concerns about German performance in the third quarter 2013

The British pound has been punished by the release of today's UK inflation data; some would argue that the currency has been actually been punished too hard (read what Peter Gallo at BMO Capital says on the matter here).

Nevertheless, currency traders continue to punish currencies on weak inflation in this era of quantitative easing.

"UK inflationary figures came in 0.1% lower than the 3% forecast. With slowing inflation here in the UK, this could leave more room for the Bank of England to maintain its accommodative monetary policy. Tomorrow the BoE will shed further light on how policy makers voted to leave interest rates unchanged," says Lee Mumford at Spreadex.

The performance of the euro / pound exchange rate pairing has also largely been determined by movements in the larger euro / dollar exchange rate today - and we are seeing widespread euro strength.

Euro ignores worries over outlook for German economy

The euro's performance is particularly interesting if we consider today's less-than-inspiring ZEW data.

Shaun Osborne at TD Securities notes that broad-based euro strength has come despite concerns for the German economy in 2013:

The ZEW index was a mixed bag, with expectations slipping from 38.5 to 36.3 for July (mkt 40.0), but the current assessment rising from 8.6 to 10.6 (mkt 9.0). However, it’s the expectations component that feeds more strongly into PMI and IFO trackings, so the downside there is what matters more. This supports what we’ve been saying about German growth, that while we expect to see a strong rebound in Q2, with GDP growth close to 4% SAAR, that kind of strength is not going to repeat itself in Q3.

For now we expect the euro to hold the upper hand until we see some kind of game changer - today's US data could throw up some surprises, if not tomorrow's testimony by Ben Bernanke to the US congress surely will.