The Euro to Pound Sterling (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates were both trending higher on Tuesday as Greek negotiations continued, UK core inflation fell and investors felt disappointment in US Advance Retail Sales data.
US retail sales up 0.9% in March (-0.6% in Feb), missing consensus of +1.1%, but still largest rise in a year
— Markit Economics (@MarkitEconomics) April 14, 2015
The Pound Sterling exchange rate initially took a dive as UK core inflation dipped from 1.2% on the year to 1.0% in March. Economists had forecast the Consumer Price Index (CPI) to remain at 1.2%. The non-core measure remained at 0.0%.
However, many experts have suggested that the fall in core inflation is not a great cause of concern.
Industry expert Peter Cameron stated: ‘Inflation has remained at 0% this morning but could well fall negative in the next couple of months. The fall in inflation over the past year has been driven by declines in the prices of essential, everyday items like food and fuel.’
‘Therefore it is the equivalent of handing consumers a temporary tax cut through cheaper household bills. What we have not witnessed in the UK so far is the toxic form of deflation that occurs when people defer purchases of big ticket items on the idea that they will become cheaper in the future.’
Meanwhile, Eurozone Industrial Production rose by a hefty 1.1% in February, which allowed the annual figure to rise from a negatively revised 0.4% to 1.6%, far higher than the 0.8% forecast.
Some recent Eurozone data has been more upbeat than economists had predicted—perhaps a result of more accommodative monetary policy by the European Central Bank (ECB).
Economist Jessica Hinds stated: ‘Today’s data suggest that the Eurozone’s industrial sector helped the wider economic recovery to gather pace.’
However, ongoing Greek negotiations are weighing on the Euro exchange rate, with the country coming dangerously close to running out of funds and talks seemingly yielding few results.
Tuesday saw speculation heighten that Greece may default on its next International Monetary Fund (IMF) repayment—an event that could lead to a Grexit.
Furthermore, reports of Greek government officials suggesting a default is on the cards have surfaced and have encouraged little faith in negotiations.
One Greek government official is reported to have said: ‘We have come to the end of the road… If the Europeans won’t release bailout cash, there is no alternative [to a default].’
US Dollar to Euro (USD/EUR) Exchange Rate Unsupported by Advance Retail Sales
Meanwhile, the US Dollar could be in for a major day of trading with US Advance Retail Sales forecast to record 1.0% growth in March after February’s -0.6% contraction.
Any rise in sales could feasibly send the US Dollar to Pound Sterling (USD/GBP) and US Dollar to Euro (USD/EUR) exchange rates higher, while any fall below could see the ‘Buck’ tumble.
Friday will be another massive day for US Dollar movement with US inflation data published. The core Consumer Price Index is forecast to record 0.2% growth while the non-core measure is predicted to register a 0.3% rise.
However, the annual ecostats are expected to remain at 1.7% and 0.0% respectively.
Pound Sterling (GBP) Exchange Rate Forecast: GBP/EUR, GBP/USD
The Pound Sterling exchange rate will also be in for an influential day on Friday with the release of the highly influential UK Average Weekly Earnings, Unemployment Rate and Employment Change figures.
Any upbeat labour market data could send the Pound trend significantly higher, while any downbeat stats could see it drop.
Final Eurozone Consumer Price Indexes will also be made available and could impact the Euro exchange rate quite significantly if out of line with flash forecasts.
The Euro to US Dollar (EUR/USD) exchange rate is trading at 1.0660; the Euro to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.7230.
