- Euro/GBB on German retail sales data.
- The euro area faces pressure as the European Central Bank Restores the Performance Path Path.
- The British pound failed to extend the gains despite the high inflation and expectations of positive growth.
Euro (Euro) is emptied against the British pound (GBP) on Friday, where EUR/GBP holds over the simple moving average for 100 days (SMA) near 0.8415.
This week witnessed noticeable contradictions between the United Kingdom and the euro area, especially as the Bank of England and the European Central Bank (ECB) is likely to approach the coming months.
Retail sales numbers in Germany send mixed signals to euro dealers
Retail sales in Germany in April decreased by 1.1 %, a more severe increase than the increase by 0.2 % that was expected. Despite the weak monthly number, the annual reading was 2.3 % stronger than expectations, providing some reassurance that the basic demand did not collapse.
German inflation data provides possible winds for the European Central Bank
The initial consumer price index (CPI) for the month of May was in line with expectations, as it fits with expectations both monthly and annual.
However, the initial coordinator of consumer prices (HICP) – which reflects inflation in a uniform coordination across the European Union member states – increased by 0.2 % of MOM (compared to 0.1 %) and 2.1 % on an annual basis (compared to 2.0 %).
In general, the data draws a picture of the slow consumer environment with inflation is still more hot than the ideal, while maintaining pressure on the European Central Bank as it evaluates the date of setting its easy fiery policy.
Meanwhile, the recent inflation data issued by the United Kingdom (UK) was surprised this week. In addition, the International Monetary Fund (IMF) raised the growth forecast for the United Kingdom on Tuesday, which led to expectations that the Bank of England would retain its prices for a longer period.
The difference in monetary policy remains a major topic for EUR/GBP, which contributes to the potential direction of the husband in the short term.
Common questions among central banks
Central banks have a major mandate is to ensure that there is a price stability in a country or region. Economics are constantly facing inflation or contraction when the prices of some goods and services fluctuate. High prices for the same goods mean inflation, and the continuous reduction of the same goods means shrinkage. The central bank’s mission is to maintain demand for queue by adjusting the policy price. For the largest central banks such as the American Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BOE), the mandate is to maintain inflation approximately 2 %.
The central bank has one important tool at its disposal to obtain inflation higher or less, and this is by changing the standard policy price, known as the interest rate. In the previous moments, the Central Bank will issue a statement of its policy price and provide an additional reason about the reason that remains or changes (cutting or walking). Local banks will adjust their savings rates and their lending rates accordingly, which in turn will make it difficult or easier for people to gain their savings or companies to obtain loans and provide investments in their business. When the central bank raises interest rates significantly, this cash tightening is called. When you cut its standard price, it is called cash reduction.
The central bank is often political independent. Members of the Central Bank Policy Council pass through a series of paintings and sessions before being appointed to the Policy Council seat. Every member of this council is often a specific condemnation of how to control the central bank for inflation and subsequent monetary policy. Members who want a very loose monetary policy, with low cheap lending rates, are called to increase the economy significantly while they are satisfied with a slightly higher vision of inflation than 2 %, “doves”. Members who want to see higher rates to reward savings and the desire to keep lighting on inflation at all times “hawks” will not be rest until inflation is at 2 % or less than 2 %.
Usually, there is a president or president who leads each meeting, who needs to create a consensus between hawks or doves and has a final saying when it is divided into the division of voting to avoid a 50-50 tie about whether the current policy should be modified. The president will often deliver speeches that can be followed directly, as the current monetary position and expectations are connected. The central bank will try to push its monetary policy forward without operating violent fluctuations in prices or shares or currency. All members of the central bank will direct their position towards the markets before the policy meeting occurred. A few days before a policy meeting was held until the new policy is connected, members are prevented from speaking publicly. This is called the obstruction period.
