The Pound to Euro (GBP/EUR) exchange rate firmed on Wednesday and the EUR weakened against the USD and other major peers after weaker than expected inflation data caused investors to raise their bets that the European Central Bank could introduce stimulus measures in an effort to counter low inflation.
The Euro was also under pressure from the publication of GDP data which came in lower than expected. The final estimate of Eurozone GDP for the final quarter of last year came in at 0.3%, lower than the 0.2% expected.
Fears increased that the Eurozone could be sliding into deflation after today’s PPI data showed that prices charged by factories fell across the region in February, and the decline was worse than economists had been expecting.
According to Eurostat’s PPI report, inflation fell by 0.2% in February. Economists had been forecasting for a figure a decline of 0.1%. The fall adds to January’s decline of 0.3%. On a yearly basis, producer prices tumbled by 1.7% across the Eurozone.
The nations that reported the largest declines were; Cyprus -5.4%, Lithuania -4.6%, Belgium -4.2%, Slovakia -3.8% and Greece with -3.5%.
Sterling was supported by the publication of positive construction and house price data.
Against the US Dollar the Euro was little changed but softened slightly following the release of the inflation data. Traders are remaining cautious ahead of tomorrow’s European Central Bank meeting. The Bank is expected to leave interest rates unchanged at the record low level of 0.25%. Traders will be looking to see if the Bank hints at introducing stimulus measures at the ECB Press conference which follows the rate decision.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3792 ,
Euro,, Pound Sterling,0.8288 ,
Euro,,Australian Dollar,1.4919 ,
Euro,,Canadian Dollar,1.5198 ,
[/table]
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