On Monday the Euro was trading in a narrow range against the Pound as both European assets experienced domestic pressures.
The appeal of the Pound was somewhat diminished by comments issued by Bank of England Governor Mark Carney regarding the negative impact of surging UK house prices.
Carney observed that the housing market poses the ‘biggest risk to financial stability, and therefore to the durability of the expansion’.
The BoE chief then intimated that policy makers might have to consider introducing loan-type restrictions and putting more checks on mortgage affordability in order to counter the current situation.
The strength of the Pound was also cited as creating considerable challenges for the UK’s exporters.
This news was swiftly followed by a report showing a surge in the asking prices of UK properties.
Asking prices jumped by 3.6 per cent on the month and were up 8.9 per cent on the year.
Meanwhile, speculation that the European Central Bank will introduce additional stimulus in June continues to restrain the Euro.
The majority of economists expect the central bank to take policy action next month.
According to economist Elwin de Groot; ‘Draghi clearly pre-committed. As any other central banker should know, he would risk his reputation, and a significant strengthening of the Euro, if the ECB doest follow through in June.’
Whether the financial institution will introduce negative rates, another rate cut or a new bond-buying programme remains to be seen.
The Euro was also feeling the heat this morning as construction output in the Eurozone unexpectedly declined in March.
Although February’s figure was positively revised to a gain of 0.4 per cent, construction output in the 18-nation currency bloc contracted by a seasonally adjusted 0.6 per cent in March, month-on-month.
On the year construction output was up by 5.2 per cent, down from an annual gain of 7.5 per cent in March.
The news had little immediate impact on the Euro and the Euro to Pound pairing remained a modest 0.13 per cent weaker.
Tomorrow’s German producer price data and UK consumer price index could inspire significant volatility in the Euro to GBP pairing.
If the UK’s inflation data shows that consumer prices climbed in April the odds of the Bank of England introducing a rate increase will rise and the Pound could rally against the Euro.
Other economic news for the Eurozone worth noting this week includes the region’s consumer confidence report, Markit manufacturing/services PMI and German gross domestic product.
UK retail sales data and the publication of minutes from the latest Bank of England policy meeting will also have an impact on the Euro to Pound pairing.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8157,
Euro,,US Dollar,1.3711,
Euro,,Canadian Dollar,1.4875,
Euro,,Australian Dollar,1.4666,
Euro,,New Zealand Dollar,1.5878,
US Dollar,,Euro ,0.7291,
Pound Sterling,,Euro,1.2261,
Canadian Dollar,,Euro,0.6717,
Australian Dollar,,Euro,0.6819,
New Zealand Dollar,,Euro,0.6298,
[/table]
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