EUR/GBP Exchange Rate Plummets Today as Low Inflation Sparks ECB Easing Expectations
The Euro to Pound Sterling (EUR/GBP) exchange rate dived by around -1.0% on Wednesday afternoon.
Amid rising concerns that the European Central Bank (ECB) will ease monetary policy this month the Euro has struggled versus its major peers. After recent data showed February’s consumer prices dropped to -0.2%, having reached 0.3% previously, the single currency has maintained a weakened trade weighting.
On Wednesday the shared currency extended losses after ECB Executive Board Member Benoit Coeure hinted heavily that the Frankfurt-based central bank will employ stimulus measures this month. Coeure stated that policymakers have been monitoring the impact of negative interest rates which suggests that the ECB will look to cut the overnight cash rate. There is also the possibility that policymakers will choose to expand asset purchases, or combine both a cut and expansion of quantitative easing.
Disappointing domestic data, which showed Eurozone Producer Prices maintained very low levels in January, aided the Euro depreciation today.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7715.
GBP/EUR Exchange Rate Forecast to Rally on Corrective Trading
With mounting concerns that the sharp Sterling depreciation amid EU referendum uncertainty was overdone, the British Pound has enjoyed steady appreciation over the past few days. Corrective trading overshadowed disappointing domestic data which showed February’s British Construction Output unexpectedly slowed.
Responding to the UK construction data, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said: ‘The sector felt the pressure of challenging global economic conditions and softer demand growth as purchasing activity expanded at its weakest pace since April 2015. Suppliers’ delivery times got longer and some stock shortages added to their woes.’
EU referendum uncertainty is still an ever-present concern for investors, however. In the period leading up to the June 23rd vote there is a very real chance that the British Pound will soften considerably.
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.7706 during Wednesday’s European session.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: UK Services PMI to Provoke Volatility
Given that UK sectoral growth has been well short of forecasts thus far this year, tomorrow’s Services PMI for February will be of high significance. The services sector accounts for the largest portion of British Gross Domestic Product, so a disappointing figure is likely to cause the Pound to resume depreciation.
Thursday’s Eurozone Retail Sales data will also be likely to impact the EUR/GBP conversion rate, as will February’s US Non-Manufacturing/Services Composite thanks to EUR/USD negative correlation.
The Euro to Pound Sterling (EUR/GBP) exchange rate reached a high of 0.7813 during Wednesday’s European session.
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