Pound to Euro Exchange Rate (GBP/EUR) range bound as UK construction PMI & Euro PPI data disappoint

The GBP/EUR exchange rate was struggling to find direction on Tuesday as negative data out of both the Eurozone and UK held both currency’s in check.

The single currency initially edged higher against a number of peers including the US Dollar and Swiss Franc as market sentiment improved as tensions over Ukraine were seen to have eased after Russian forces returned to bases following the end of military exercises’ on Ukraine’s border.

Worries over Europe’s gas supply were also eased after it emerged that thanks to a mild winter the region has enough natural gas stored to cover any disruption of supply from Ukraine to last 45 days.

Investors are remaining cautious however after the West said that it was considering imposing economic sanctions onto Russia.

The Pound was softened by the release of data which showed that expansion in the UK’s construction sector slowed last month. According to Markit’s UK construction PMI, activity in the construction sector fell to 62.6 in February, down from January’s figure of 64.4. The fall was being blamed on the floods which hit the country.

The Euro would normally have made gains following the data but today it was restrained by disappointing Producer Price inflation data.

Eurostat’s Producer Price Index dropped by a seasonally adjusted figure of 0.3% in January. The fall was more than the 0.1% decline expected by economists. Year-on-year the PPI fell at an annualised rate of 1.4% in January, more than the 1.3% drop expected.