The Euro to Pound Sterling (EUR/GBP) exchange rate strengthened by around 0.19% on Tuesday morning.
As traders await British consumer prices data, the Pound slumped versus its major peers. This can be attributed to the market consensus that inflation will fall below 1%, easing pressure on the Bank of England to normalise monetary policy.
The Euro, meanwhile, is mostly trending lower versus its rivals as the prospect of quantitative easing still weighs on demand.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7818.
Yesterday…
The Euro to Pound Sterling (EUR/GBP) exchange rate softened by around -0.11% on Monday.
Although recent labour data delayed bets as to the timing of a Federal Reserve rate increase, the policy divergence between the Fed and the European Central Bank (ECB) is causing some economists to forecast EUR/USD parity by 2016. As the ECB moves towards purchasing government bonds to add liquidity, the shared currency is slumping versus its major peers.
The Pound Sterling, meanwhile, softened against most of its rivals after sluggish factory output highlighted weak economic momentum; causing futures traders to pare bets as to the timing of a benchmark rate revision from the Bank of England.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7801.
Euro (EUR) Exchange Rate Declines on Stimulus Bets
As the likelihood of the ECB intervening to combat weakness in the Eurozone grows, the shared currency dived versus its most traded rivals.
However, quantitative easing is highly opposed by many German economists, such as Hans-Warner Sinn, who stated; ‘The risk of deflation is just a pretext for quantitative easing, for hammering out a bailout program for southern Europe.’ The decline in inflation is due to lower crude prices and ‘there’s no need for ECB action,’ he said.
‘The issue is about finding a common denominator that most people can agree on,’ said Anatoli Annenkov, senior economist. ‘It’s easy to see there is a majority among governors to move ahead. Much less clear is how much risk they are willing to take and how this support translates into practice.’
The Euro to Pound Sterling (EUR/GBP) exchange rate has fallen to a low today of 0.7798.
Pound Sterling (GBP) Exchange Rate Softens on Sluggish Economic Momentum
After British data showed factory output and services growth slowed, signs of laboured economic momentum caused the Pound to slump amid bets of a delay to monetary policy normalisation. ‘Disappointing official data are adding to survey evidence which indicate that the rate of UK economic growth slowed towards the end of last year,’ said Chris Williamson, chief economist at data analysts Markit.
In addition to signs of a slowing in growth momentum, the Pound softened further after Lloyds Employment Confidence declined from 1 to -2.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Hold Steady
Given the lack of domestic data to drive changes, the Euro to Pound Sterling (EUR/GBP) exchange rate is likely to continue trending within a narrow range on Monday.
The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high today of 0.7830.
