We also saw Sterling weakness yesterday, following the Bank of England Quarterly inflation report. The pound hit a 2 week low versus the dollar as the Bank of England's forecast that inflation would remain well below target cooled speculation of an early interest rate hike. Also we saw UK unemployment rise.
The central bank said it was "more likely than not" that inflation would fall below 1 percent in autumn, suggesting that markets are pricing in rate hikes too early. UK rates are currently at a record low 0.5 percent.
"To some extent, the BoE was dovish in that they talked about the potential for inflation to go below 1 percent," said Lauren Rosborough, senior currency strategist at Westpac in London.
"So they were dovish, yes, but no more than what Speaking to reporters after the report's release, BoE Governor Mervyn King acknowledged the pound's tumble from above $2.10 just over a year ago by saying that a weak currency would have some impact on rebalancing the economy, but his comments had little sway on sterling.
I believe that we're now near the bottom of GBPEUR, as we've had all the bad news possible from the UK - look however for positive figures from the EU this morning, as better than expected results may show a further slight drop, but I think we have support at around 1.16. Against the USD however, we could see further drops.
GBPUSD
Sterling may have more room to fall versus the dollar in the near term if the U.S. central bank does not extend its quantitative easing program, as widely expected. "In the event that Fed gives no new indication on asset purchases, this will leave sterling exposed to deeper losses as the BoE remains the most generous provider of QE," said Ashraf Laidi, chief market strategist at CMC markets in London.
Todays Data - At 09:00am we have further GDP figures for the whole Eurozone, and also a monthly report by the ECB. For the US this afternoon, we have Import Prices, Jobless Claims and Retail Sales.
Finally - after some requests for more information with regards to the Antipodean currencies, AUD and NZD, tomorrow we will look at where rates may go for Sterling to these pairs.
NEWSFLASH 09:10am - Gemany and France exit recession - The French and German economies both grew by 0.3% between April and June, bringing to an end year-long recessions in two of Europe's largest economies ...http://news.bbc.co.uk/1/hi/business/8198766.stm
Hardly any effect on rates however, as this was expected.
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