EUR/GBP Exchange Rate Gradually Gains despite Negative German Economic Sentiment
Having gained a boost from cheap oil imports over the past few days, the single currency softened against the majority of its peers on Tuesday. With negative sentiment towards the Pound mounting following an International Monetary Fund report, Sterling looses have been compounded after inflation data failed to meet with expectations.
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The Euro to Pound Sterling is currently trending in the region of 0.7936.
A huge decline in global oil prices has been beneficial for the 18-country currency bloc as it imports a tremendous amount of crude. Ben Sharples, writing for Bloomberg, stated; ‘Oil futures have collapsed into bear markets as shale supplies boost U.S. output to the most in almost 30 years and global demand weakens. The biggest producers in the Organization of Petroleum Exporting Countries are responding by cutting prices, sparking speculation that they will compete for market share rather than reduce supply.’
Sterling has struggled against most of its major peers over the past few days since the publication of an International Monetary Fund report. The report suggested that the pace of global economic growth has slowed considerably. This, in turn, has caused traders to revise their bets as to the timing of a rate hike from the Bank of England.
The Euro to Pound Sterling exchange rate has fallen to a low today of 0.7908.
Tuesday’s European data left a lot to be desired. The German ZEW Survey for Economic Sentiment came in at -3.6 which was well below the forecast of 0, and even further adrift from the previous figure of 6.9.
Adding to the Euro decline have been negative results from Eurozone Industrial Production, the Eurozone Economic Sentiment Survey and the German Current Situation Survey. All of these reports declined from their previous figures and came under the median market forecasts.
However, the Euro is still gaining against the Pound. Sterling has suffered a massive depreciation after inflation data printed particularly negatively. The Consumer Price Index was forecast to drop from 1.5% to 1.4%, but the actual result fell to 1.2%. Additionally the Core CPI was unable to meet with the market consensus and declined from the previous figure.
Given that the Bank of England has set their inflation target at 2.0%, the fact that the CPI data indicated that inflation was moving away from that target has been particularly detrimental. The Bank of England has also highlighted inflationary issues as the key stumbling block preventing a benchmark rate hike.
Forecast for the Euro to Pound Exchange Rate
Although there are plenty of domestic data publications pertaining to both Europe and Britain on Wednesday, neither currency is very likely to rebound from Tuesday’s slump.
The EU-Harmonised German Consumer Price Index is the most likely European domestic data publication to spark changes.
Those invested in Sterling will be interested to see how the labour market data correlates with inflation, with particular reference to Average Weekly Earnings.