The Euro to Pound Sterling (EUR/GBP) exchange rate, after taking hits last week, seems to have regained some ground after better-than-expected inflation data was released by the Eurozone’s most powerful economy.
Hopes for Eurozone Growth Up After German CPI Prints Well
Starting the week on a downtrend, the weakened Euro began regaining a little strength during yesterday’s session as the German monthly and annual Consumer Price Index (CPI) printed more positively than expected.
While its growth is still slow and gradual, the EUR/GBP pair has climbed over 60 pips since yesterday evening and is currently trending in the region of 0.7898, returning to very near the week’s opening levels of 0.7903.
German CPI released on Wednesday afternoon showed that growth doubled month-on-month from February’s 0.4% to March’s 0.8%. The yearly figure, on the other hand, accelerated to 0.3% from its previously stagnant figure of 0.0%.
While the shared currency is still under pressure from last week’s European Central Bank’ (ECB) bulletin reminding investors that further easing was still possible, the unexpectedly high German data has sparked a little hope for investors.
As the most influential economy within the Eurozone, it was hoped that higher than forecast inflation in Germany could possibly be reflected in general Eurozone data printing more positively too. Positive Eurozone CPI would be good news for investors and the ECB itself.
However, non-core annual Eurozone CPI released essentially as expected, coming in at -0.1%, up from -0.2%. The core figure of the same period accelerated to a slightly better-than-forecast 1.0%.
Sterling Bites Back with Better-Than-Expected UK GDP
As if determined to not lose the rally it begun, the Pound may be able to keep the Euro at bay after data released this morning proved better than predicted for Britain too.
The UK has recently come under political and economic stress as the nation debates the possibility of exiting (or ‘Brexit’ing) from the European Union. However, consumer confidence printed at a calm 0 rather than the forecast contraction of -1.
British Gross Domestic Product (GDP) was also released this morning, with the headline year-on-year figure for the fourth quarter coming in at 2.1% – above forecasts that growth would continue at a steady pace of 1.9%. Quarter-on-quarter GDP also released 0.1% higher than predicted, at 0.5%.
Unfortunately not all UK data has been positive. While mortgage approvals were estimated to have dropped from 74.1k to 73.5k, they actually printed at 73.1k.
This figure could be forecast to worsen even further in coming months after the Bank of England’s announcement to tighten lending conditions this week.
Bank of England Governor Mark Carney also spoke in Tokyo today, stating that monetary policy is not enough to solve difficulties faced by low-growth regions – a statement that may be relevant for both Britain and the Eurozone.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: Further Good Data May Dispel Euro Weakness
While the Pound’s weak streak is likely to continue until the EU referendum in June, the Euro’s chances are a little more dependent on the strength of the Eurozone economy in general.
The Eurozone is due to release unemployment data for February tomorrow. While not as important as today’s CPI data, another positive release may help give the Euro some strength.
A few important British figures are also due tomorrow including house prices, currently tipped to print at 5.1%, and Manufacturing PMI which analysts predict will rise to 51.2.
As the Eurozone economy seems to be growing slightly, investors may become slightly calmer on the possibility of further easing measures from the ECB.
The Euro to Pound Sterling (EUR/GBP) exchange rate currently trends around 0.7898 while the Pound Sterling to Euro (GBP/EUR) exchange rate trends in the region of 1.2660.