The Pound may have begun today close to its lowest level against the Euro so far in 2014, but the Pound to Euro exchange rate shifted as trade continued and influential economic reports for the UK and Eurozone were released.
Sterling came under significant pressure ahead of the publication of UK inflation figures and the Euro was able to extend gains recorded yesterday in response to predominately positive services/manufacturing figures for the Eurozone.
However, the common currency went on to weaken on Tuesday as measures of German sentiment declined by more than expected.
The slip in the Ifo German business climate index was the first drop for five months. The measure fell from 111.3 in February to 110.7 in March, less than the reading of 110.9 expected.
Similarly, the German expectations index fell to its lowest level since October, edging from 108.3 to 106.4.
It wasn’t all bad news though, as the gauge of current conditions advanced from 114.4 to 115.2.
According to Bloomberg News, the report prompted this response from economist Annamaria Grimaldi; ‘German growth prospects for 2014 could be harmed if exports to Russia and Eastern Europe remain stagnant or if China’s slowdown is confirmed. But looking at growth at the end of 2013 and at the beginning of this year, the indications remain positive for the coming months.’
The Euro posted widespread declines after the reports were released, easing lower against the Yen and US Dollar and trimming its previous gains against the Pound.
That being said, the British currency’s bearish relationship with its rivals continued as UK inflation figures confirmed that CPI remained below the Bank of England’s 2 per cent target level last month.
The inflation rate hit its lowest level for over four years, adding to the case for the BoE holding interest rates at record lows.
Prior to the figures’ publication economist Howard Archer noted; ‘Underlying price pressures should be limited for some time to come. Given the spare capacity in the economy and the extended squeeze on consumers’ purchasing power, the pricing power of retailers, manufacturers and services companies is likely to remain limited for some time to come.’
While today’s US consumer confidence data could trigger additional market movement, further fluctuations in the GBP/EUR pairing may be limited before tomorrow and the publication of the German GfK consumer confidence survey.
Economists are expecting the measure to hold at 8.5.
Investors will also be looking ahead to Thursday’s UK retail sales figures.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8388,
Euro,,US Dollar,1.3827,
Euro,,Canadian Dollar,1.5481,
Euro,,Australian Dollar,1.5130,
Euro,,New Zealand Dollar,1.6164 ,
US Dollar,,Euro ,0.7232,
Pound Sterling,,Euro,1.1923,
Canadian Dollar,,Euro,0.6459,
Australian Dollar,,Euro,0.6616,
New Zealand Dollar,,Euro,0.6192 ,
[/table]
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