The Pound (GBP) is on course to end the week higher against the Euro (EUR) after the single currency was weighed upon by another bout of disappointing economic data releases.
Sterling found support early in Friday’s session after the latest Consumer Confidence report released by Market Research Company GfK came in better than forecast.
The consumer confidence index increased by three points to 1 in August, beating expectations for a figure of -1 and was better than the previous months figure of -2.
The figure is only the second time the index has risen into positive territory since March 2005.
The currency also received support from a report published by Nationwide which showed that UK house prices increased more than expected in August, the data contradicted expectations that the nation’s housing market is slowing.
Friday proved to be another bad day for the Euro as a string of economic data releases increased concerns over the strength of the Eurozone economy.
Retail sales in Germany, the Eurozone’s largest economy declined sharply in July to fall by -1.4% on a monthly basis. Analysts had been expecting a rise of 0.1%. Year on year retail sales also disappointed expectations for an increase of 1.5%, instead sales rose by just 0.7%. Sales data out of Spain also disappointed.
The Euro then softened further after data released by Eurostat showed that the annual rate of inflation across the region dropped from July’s figure of 0.4% to 0.3% in August, in line with forecasts.
The fall in inflation-increased concerns that deflation could take root in the Eurozone and increased speculation that, the European Central Bank will introduce new monetary easing measures at next week’s policy meeting.
According to Eurostat t Eurozone’s core inflation rate, which strips out volatile items such as energy, food, tobacco and alcohol, rose to 0.9% from 0.8% in July.
Adding to worries over the health of the single currency bloc was a separate report, which showed that unemployment remains high at 11.5%.
With Italy back in recession, France stagnating and Germany slowing, we can expect the jobless rate to edge up unless action is taken to encourage growth.
Escalating tensions and worries over the Ukraine crisis are also weighing upon the single currency.
‘Much more important than inflation rates now is the economic rough patch caused by the crisis in Eastern Ukraine.
Forward-looking indicators continue to fall, raising the risk that the Eurozone recovery may be interrupted for longer.
That could delay any reversion in inflation trends and mean lower inflation for longer. As that risks de-anchoring inflation expectations, the ECB is likely to step up its response by December at the latest,’ said Christian Schulz, senior economist at Berenberg.
Pound Sterling to Euro Exchange Rate Forecast
The Pound is likely to make gains against the Euro next week, as economists will be focusing on the ECB’s policy meeting due to be held on September 4.
Economists are speculating that policy makers could make further cuts to the regions interest rate. They could also introduce a quantitative easing programme in an effort to stimulate growth and counter deflation.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6589 ,
Pound Sterling,,Euro,1.2582 ,
Pound Sterling,,Australian Dollar,1.7755 ,
Pound Sterling,,New Zealand Dollar,1.9798 ,
US Dollar,,Pound Sterling,0.6028 ,
Euro,, Pound Sterling ,0.7945 ,
Australian Dollar,, Pound Sterling ,0.5632 ,
New Zealand Dollar,, Pound Sterling,0.5054 ,
[/table]
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