EUR/GBP Extends Losses as UK CPI Prints Bullishly
The highly anticipated British Consumer Price Index report was released earlier today, showing an unexpected rise in inflation figures.
March’s month-on-month print released at 0.4%, beating forecasts of 0.3% and doubling February’s 0.2%. The year-on-year figures were also impressive, with the core figure coming in at 1.5% over March 2015’s 1.2% and non-core CPI releasing at 0.5%, up on the previous figure of 0.3%.
Pound gains were slightly softened by IMF statements that a ‘Brexit’ could negatively impact the global economy, but the Euro wasn’t able to sustain gains due to a lack of optimistic Eurozone data.
GBP Higher as UK Chancellor George Osborne Publishes Tax Returns, PM David Cameron Speaks to Parliament
David Cameron is speaking to Members of Parliament for the first time since the ‘Panama Papers’ leak went public, defending and discussing the allegations against him.
Cameron announced that various ‘tax havens’ have signed an agreement to share more details on offshore taxes and beneficial ownership with UK law enforcement, in a move that could inspire more confidence that tax money will return to the UK.
Currently, Sterling has consolidated previous gains against the Euro and still trends around the region of 0.8022.
However, the Pound could slide back against the Euro during Tuesday’s European session if the UK’s latest inflation data fails to impress. As it stands, annual non-core CPI is expected to improve to 0.4%.
The Euro to Pound Sterling (EUR/GBP) exchange rate is trending in a narrow range as last week’s UK and Eurozone developments weigh on the pair. With the data calendar fairly empty today, other factors are provoking EUR/GBP movement.
Italian Industrial Output Drags Euro (EUR) Exchange Rate Lower
After the EUR/GBP pair approached a two-year-high last week, the Pound appears to have bounced back this morning.
This comes despite an absence of positive UK data.
Dropping over -70 pips in under an hour, the pairing looks to be having a rocky start to the week. EUR/GBP opened around 0.8071 and currently trades around 0.8027.
Soft Eurozone data released this morning is partly responsible for the Euro to Pound Sterling slide.
Italy’s February industrial output data was released this morning, with the year-on-year figure dropping from 3.8% to a disappointing 1.2% despite forecasts of 1.6%. While not typically an influential Eurozone figure, in the absence of other news the print weighed on the shared currency this morning and assisted the Pound’s advance.
Germany’s trade balance boasted a healthy 20.3b when it printed on Friday, but the report seems to have done little to offset investor fears towards the European Central Bank’s (ECB) discussions of further easing.
Pound Sterling (GBP) Confidence up as UK Parliament Returns from Easter Recess
Investors may be hoping that various ongoing UK issues can now be properly discussed as Parliament returns from its Easter recess.
Officially not in business for the past two weeks, Parliament was dismissed for an Easter break on the 24th of March and reconvened this morning.
Now that the various issues that became prominent over the last two weeks can be discussed in parliament, investors rushed to the Pound in hopes of damage control measures being deployed.
Ongoing issues within Britain include the Tata Steel crisis. The Indian steel production company began motions to sell its UK plants last night and with over 10,000 jobs on the line, investors and the general public are hoping that a buyer will come forward.
Scandals over the ‘Panama Papers’ and ‘Brexit’ also dominated headlines last week.
Calls for Prime Minister David Cameron to resign after his father was revealed to be allegedly using ‘tax havens’, as well as public frustration that taxpayer money was used to fund a Pro-EU referendum leaflet, have both resulted in petitions.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: Decline Could be Temporary
While some analysts, investors and members of the public may be hoping for Parliament to discuss and offer solutions to some of Britain’s more recent headline-topping issues, EUR/GBP’s drop may be a temporary one as the Euro has already begun to recover.
It’s likely that many eyes will be fixated on the Tata Steel situation going forward, as the company begins to formally invite bidders to submit offers for UK plants. According to the BBC, some potential buyers may already have come forward.
In terms of data, while Monday’s session promises to be relatively bare, tomorrow sees the release of various key datasets, including the final March figure for German CPI. As German data has been positive as of late, it’s possible this could inspire Euro strength.
Tomorrow morning also sees Britain set to release ONS house price data, as well as its highly anticipated March CPI prints.
The year-on-year figures are projected to show an improvement on last month’s annual results, but last week’s disappointing UK data may indicate the possibility of worse-than-expected scores.
The Euro to Pound Sterling (EUR/GBP) exchange rate currently trends around 0.8027 while the Pound Sterling to Euro (GBP/EUR) exchange rate trends in the region of 1.2457.