- Temporary halt to Greek bailout talks fails to hamper Euro
- EUR/GBP exchange rate falters after UK inflation betters forecast
- US Dollar softened as Kaplan dismisses April rate hike
- EUR/USD predicted to decline on stronger US retail sales
Euro (EUR) Softens in Anticipation of Weaker Eurozone Industrial Production Data
Ahead of the latest Eurozone industrial production figures the Euro (EUR) was trending lower against rivals, with markets anticipating a marked decline in output both on the month and the year. As a result the Euro to Pound Sterling (EUR/GBP) exchange rate was on a downtrend in the region of 0.7974, while the Euro to US Dollar (EUR/USD) pairing was slumped around 1.1354 on Wednesday morning.
Euro (EUR) Exchange Rate Strengthens Despite Halt to Greek Bailout Talks
Demand for the Euro (EUR) rallied somewhat on Tuesday morning, as the finalised German Consumer Price Index confirmed that inflationary pressure rose to 0.3% on the year in March. While stronger inflation within the Eurozone’s powerhouse economy would seem to bode well for the outlook of the currency union, investors remained concerned with Greece.
Due to the IMF’s spring meetings, negotiations over the conclusion of the Hellenic nation’s first bailout review were forced to take a temporary pause. Nevertheless, Finance Minister Euclid Tsakalotos maintained an air of optimism about proceedings, despite long-standing disagreements over pension reforms and debt relief. Tsakalotos said:
‘Progress has been made on the issues needed in order to have a deal.’
This more positive outlook helped to boost the single currency against rivals, although Wednesday’s Eurozone industrial production could reverse this uptrend. Industrial output is forecast to have dipped sharply in February, suggesting that economic conditions are weakening. This could undermine the appeal of the Euro, particularly as speculation over the future monetary policy of the European Central Bank (ECB) continues.
UK Inflation Betters Forecast to Boost Pound Sterling (GBP)
The successful agreement between Tata Steel and Greybull Capital with regards to the sale of its Long Products Europe division offered some support to Pound Sterling (GBP) on Monday. While the fate of the rest of Tata’s UK assets continues to hang in the balance this positive step nevertheless safeguards more than 4,000 jobs, and increased hopes that the UK steel industry could yet be saved.
Markets were given more cause for bullishness by the latest UK Consumer Price Index data, which revealed that domestic inflationary pressure had increased further than forecast from 0.3% to 0.5%. This stronger showing suggested that ‘Brexit’ concerns hadn’t weighed on economic conditions as severely as previously thought, offering some reassurance in the outlook of the economy. With inflation at its highest level since the end of 2014, the Pound was prompted to trend higher against many of the majors.
US Dollar (USD) Trends Lower as Kaplan Rules out April Rate Hike
Confidence in the US Dollar (USD) declined in the wake of commentary from Federal Reserve Bank of Dallas President Robert Kaplan. Rather than adding to the recent spate of hawkish rhetoric, Kaplan stated that he does not support an April rate hike, although the policymaker still left the door open for a move in June. With global market conditions less than optimal it does not seem likely that the Fed will be in any particular rush to tighten monetary policy in the near future, giving traders less reason to favour the ‘Greenback’ at this juncture.
Greater US Dollar volatility is likely on Wednesday with the release of the latest Advance Retail Sales. Economists anticipate a modest uptick in consumer demand from -0.1% to 0.1%, a result which could boost confidence in the domestic economy further. Should sales remain weaker, however, the Euro to US Dollar (EUR/USD) exchange rate is likely to trend higher.
Current EUR, GBP, USD Exchange Rates
At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending lower at 0.8013, while the Euro to US Dollar (EUR/USD) pairing was making gains in the region of 1.1451. Meanwhile, the Pound Sterling to US Dollar (GBP/USD) exchange rate was on an uptrend around 1.4287.