Early into the European session, the Euro to GBP exchange rate was trending in the region of 0.8020 having experienced minimal movement in response to the Eurozone’s inflation figures.
The Eurozone’s Consumer Price Index showed that inflation in the 18-nation currency bloc rose by 0.5% in June, year-on-year. This was unchanged from the annualised figure recorded in May and was half the 1.0% target level set by the European Central Bank.
Core Consumer Price Inflation was a little stronger than forecast, advancing by 0.8% year-on-year instead of the 0.7% expected.
However, as Germany’s inflation report (published on Friday) surprised to the upside, some investors had been hoping for a little upward surprise with the Eurozone’s own figures, so the on-estimate result was fairly Euro-neutral.
The threat of deflation led to the ECB bringing in an interest rate cut and negative deposit rate earlier in June, and today’s result has done nothing to allay concerns regarding stagnant consumer price growth in the region.
As one senior economist observed ‘This keeps the pressure on the ECB to keep the door open to further policy easing. It’s premature to suggest that this downside risk of Europe sliding into Japan deflation has vanished, it’s still a fragile economic situation.’
The Euro to GBP exchange rate was unaffected by the UK’s slightly below-forecast Mortgage Approvals figures.
Today’s Consumer Price Index for Italy fell shy of expected levels. The EU harmonised measure showed a 0.1% month-on-month increase (less than the 0.2% increase expected) and was up just 0.2% on the year in June, half the 0.4% gain anticipated.
Later this week the European Central Bank will be gathering to deliver its rate decision and fiscal policy statement.
As the central bank unleashed a raft of new stimulus measures at the beginning of June, it is highly unlikely that any further changes will be made at the present time.
Although fundamentals for the 18-nation currency bloc have been a little patchy later, some industry experts think that ECB President Mario Draghi will be less dovish than he has been of late.
If this proves to be the case we forecast that the Euro (EUR) exchange rate could climb. However, if Draghi should make any reference to the future introduction of a quantitative easing style stimulus scheme the Euro could decline and the GBP/EUR pairing might push above technical resistance of 1.25 once more.
UK reports (like the nation’s manufacturing and construction PMI) could also influence the direction taken by the Euro to GBP exchange rate over the rest of the week.
UPDATED: 06:50 GMT 01 July, 2014
Euro to GBP Exchange Rate May Soften Today
Throughout the European session on Monday the Euro to GBP exchange rate was trending in a fairly narrow range, experiencing minimal fluctuations following the release of disappointing UK Mortgage Approvals and German Retail Sales data.
The Eurozone’s Consumer Price Index came in at expected levels and had little influence on the Euro.
The Euro to US Dollar (EUR/USD) exchange rate was able to brush a one-month high during North American trading amid signs that growth in the world’s largest economy is slowing.
If today’s UK Manufacturing PMI comes in above the 56.8 level expected the Pound may be bolstered.
Similarly, confirmation of the fact that the French Manufacturing sector contracted in June may weigh on the Euro in the hour ahead.
However, an unexpectedly good unemployment report for the Eurozone would through a cat among the pigeons and could see the Euro to GBP exchange rate advance.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8026,
Euro,,US Dollar,1.3658,
Euro,,Canadian Dollar,1.4583,
Euro,,Australian Dollar,1.4531,
Euro,,New Zealand Dollar,1.5631,
US Dollar,,Euro ,0.7323,
Pound Sterling,,Euro,1.2461,
Canadian Dollar,,Euro,0.6859,
Australian Dollar,,Euro,0.6883,
New Zealand Dollar,,Euro,0.6397,
[/table]
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