Euro to British Pound (EUR/GBP) Exchange Rate Falls to 16-Month Low
The Euro sank to its lowest level in 16-months against the British Pound on Tuesday as investors raised their bets that the European Central Bank will introduce new monetary easing measures at next month’s policy meeting.
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Investors raised their expectations for new easing measures after Germanys Bundesbank said that it would back the implementation of such measures on the back of today’s disappointing economic sentiment data for the country.
According to a report in the Wall Street Journal the head of the Bundesbank Jens Weidmann said that he backs the use of new measures especially if Thursday’s Eurozone inflation data remains weak.
Expectations are high that the regions inflation rate will remain at 0.7%.
“The Euro is falling on a report that Weidmann is saying he’s ready to cut rates if needed. There’s a lot of focus on Weidmann because as the Bundesbank President, he’s on the least dovish side when it comes to the ECB. This is supporting the notion that there’s a quite high possibility of the ECB acting next month,” said a currency strategist at Credit Agricole SA.
The currency also fell following the release of data earlier in the session which showed that economic sentiment in Germany and the wider Eurozone fell sharply in May.
The ZEW Centre for Economic Research said that its index for German economic sentiment fell sharply to a reading of 33.1.
The figure was well below April’s figure of 43.2 and was below economist forecasts for a reading of 41.0.
The index for the wider Eurozone declined from April’s figure of 61.2 to 55.2 in May.
Tomorrow sees the release of the latest Eurozone industrial production data. Economists are expecting to see a fall in output.
If the data comes in weak as expected and the UK unemployment comes in strongly we can expect to see the Euro fall even further against Sterling.
Currently the Euro is trading against the British Pound in the region of 0.8143 and is trading against the US Dollar in the region of 1.3725.