The Euro to Pound Sterling (EUR/GBP) exchange rate exchange rate posted gains of around 0.3% on Tuesday as investors processed the UK’s Consumer Price Index for August.
With the measure of inflation coming in at 1.5%, in line with forecasts but well below the 2% target set by the Bank of England, the Pound came under pressure.
The pace of annual inflation had slowed from 1.6% in July, largely as a result of the ongoing price war between the UK’s major supermarkets. The 1.5% figure matched the five-year low recorded in May.
As lower levels of inflation reduce pressure on the BoE to increase interest rates, the Pound recorded widespread losses after the CPI was published.
According to economist Jeremy Cook; ‘For all the chatter, guesswork and prophecy around possible rate hikes in the UK, inflation is currently sat at a five-year low. Of course, the headline figure does not tell the full story. Core prices surprised higher by 1.9% in August, they were unaffected by the slips in oil prices or the 1.1% decline in food and booze through the past 12 months.’
The Euro to Pound exchange rate rallied and held gains even as data from the Eurozone fell short of forecasts.
For the ninth consecutive month, investor sentiment in Germany (the Eurozone’s largest economy) declined. The confidence gauge slipped to 6.9 in September, shedding 1.7 points.
According to ZEW President Clemens Fuest; ‘The economic environment is still marked by great insecurity. There is still the danger of a sanctions spiral with Russia and the Eurozone economy is still showing disappointing development’.
The Euro to Pound Sterling (EUR/GBP) exchange rate hit a high of 0.8010
The ZEW measure of the current situation also fell, sliding to 25.4 from 44.3. A reading of 40.0 had been forecast.
Meanwhile, the Eurozone’s economic sentiment index slipped from 23.7 to 14.2.
Ordinarily, such results would have triggered Euro declines but with investors focusing on the week’s bigger events (the Federal Reserve’s interest rate announcement, UK employment figures, BoE minutes and the Scottish referendum) the common currency maintained a stronger position against its peers.
The EUR/USD pairing hit a low of 1.2920.
The Euro to US Dollar exchange rate was trading over 0.15% stronger during the European session on Tuesday.
While the ‘Greenback’ continues to be supported by the expectation that the Federal Open Market Committee will adopt a hawkish tone in the policy statement accompanying the rate decision, the safe-haven asset was feeling the heat following the publication of a mixed bag of US reports on Monday.
US Industrial/Manufacturing production figures disappointed, although the nation’s Empire Manufacturing gauge impressed.
EUR/GBP Exchange Rate Forecast
The Euro to Pound exchange rate is likely to continue trending in its current range for the rest of the local session.
The EUR/GBP pairing can expect to experience notable volatility tomorrow in response to the UK’s employment figures and the Eurozone’s final inflation stats.
While a decline in the UK’s unemployment rate would be Pound supportive, investors will be paying closer attention to average wage growth. Anything less than the 0.5% increase anticipated would drive the EUR/GBP exchange rate higher.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7993
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2507
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8003,
Euro,,US Dollar,1.2960,
Euro,,Canadian Dollar,1.4325,
Euro,,Australian Dollar,1.4368,
Euro,,New Zealand Dollar,1.5885,
US Dollar,,Euro ,0.7726,
Pound Sterling,,Euro,1.2488,
Canadian Dollar,,Euro,0.6978,
Australian Dollar,,Euro,0.6957,
New Zealand Dollar,,Euro,0.6306,
[/table]
