The Pound Sterling to Euro (GBP/EUR) exchange rate softened on Monday as economic data releases out of the Eurozone came in positively, raising hopes that the single currency bloc has finally turned a corner.
The Pound Sterling to Euro (GBP/EUR) exchange rate slipped to a session low of 1.369
Earlier in the session, the Pound Sterling exchange rate had been softened by the release of data, which showed that house prices in the UK fell for the first time in five months in February and grew at the slowest annual pace since September 2013.
According to the figures published by Nationwide, house prices declined by -0.1%, well below the 0.3% rise recorded in January. On a quarter-by-quarter basis, house prices rose by just 0.8%, the weakest quarterly rise seen since May 2013. Despite the soft data, economists are forecasting that house prices will begin to rise at a faster pace over the coming months as the impact of cheaper mortgages and improving wages starts to be seen.
The Pound then received support as a separate report released by Markit economics showed that manufacturing activity in the UK hit a seven-month high in February. The latest Markit/CIPS UK manufacturing PMI rose by a full point to 54.1, a figure that beat all forecasts, and is comfortably higher than the 50 level that divides expansion from contraction.
Eurozone Data Supports the Euro Exchange Rate
After several weeks of uncertainty over the Greece situation, the Euro received support from the release of positive economic data.
Unemployment across the 19-member Eurozone fell more than forecast in January. The overall jobless rate fell from 11.4% to 11.2%, raising hopes that the unemployment crisis affecting the region could finally be heading in the right direction. Eurostat reported that the number of unemployed people in the euro area fell by 140,000 in January, meaning 18.059 million were still out of work.
The single currency also received support from data, which showed that consumer prices in the region fell by a less than expected number last month and core inflation held steady. According to Eurostat, consumer prices in the region fell by 0.3% on an annual basis. Economists had been forecasting for a figure of 0.4% fall.
The combination of easing price declines and a falling unemployment rate will give some encouragement to European Central bank policy makers as they prepare to meet in Cyprus on Wednesday and Thursday to launch their new stimulus program.
Investors will now be looking ahead to Tuesday’s UK Construction PMI and Eurozone PPI data releases.
Data Releases
Flash Eurozone Inflation came in at -0.3%, better than the -0.5% forecast
Flash Eurozone Core Inflation came in at 0.6% as forecast.
Eurozone Unemployment fell from 11.4% to 11.2%
The Pound Sterling to Euro exchange rate was trading in the region of 1.374
