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Euro to Pound (EUR/GBP) Exchange Rate Declines after Eurozone Inflation Rate Slowdown

The Euro has made a -0.4% decline against the Pound near close of trading on 23rd February.

This deterioration was down to a combination of factors, including lower inflation and a dovish European Central Bank (ECB) outlook.

Neither factor was ‘new’ news, but with no positive data to refer to Euro traders took a definite negative stance on the single currency.

The Euro has a chance at recovering against the Pound on 26th February, when ECB President Mario Draghi will be making a speech.

(First published 23rd February, 2018)

Falling Final Inflation Figures Trigger Euro to Pound Exchange Rate Losses

At the end of the week, the Euro to Pound (EUR/GBP) exchange rate has fallen by a minor amount following an update to Eurozone inflation rate figures.

The base yearly Eurozone inflation rate in January has been revised down from 1.4% to 1.3%, while the month-on-month figure has crashed from 0.4% to -0.9%.

Core inflation (which strips out volatile factors like fuel and food costs) rose in January, but this hasn’t prevented Euro to Pound exchange rate losses.

Looking at the figures in more detail, the picture wasn’t quite as bleak as the overall falling inflation figure suggested.

The only country to actually see deflation in January was Cyprus, with a -1.5% drop reported during the month.

Other poor performers were Greece and Ireland, who respectively saw minimal price growth of 0.2% and 0.3%.

The wider issue is that with inflation diverging from the European Central Bank’s (ECB) 2% target, there are lower chances of any near-term monetary policy adjustment.

Hopeful Conclusion to Brexit Meeting Pushes Pound to Euro (GBP/EUR) Exchange Rate Up

Political optimism has supported the Pound to Euro (GBP/EUR) exchange rate today, in the wake of a lengthy government meeting on Brexit.

At the Prime Minister’s countryside retreat, Chequers, senior cabinet ministers debated the next stage in the Brexit process.

There hasn’t been any explicit commentary on what took place during talks, but the overwhelming attitude is that the meeting laid groundwork for policy creation.

Brexit divisions are seemingly entrenched among Conservative ministers, but the Chequers meeting has reduced the focus on internal arguments for now.

Euro to Pound Exchange Rate Forecast: EUR/GBP Rate could Struggle on Falling Confidence Stats

The Euro’s struggles against the Pound may continue next week, as there will be a number of negatively-forecast Eurozone data releases from Tuesday to Thursday.

Tuesday will see the release of Eurozone economic confidence survey results for February; these are expected to show declines in most areas.

Following January’s inflation rate slowdown, Germany’s reading for February (out on Tuesday) may also weaken the Euro as it is tipped to show lower inflation.

Keeping inflation rates in mind, Eurozone-wide estimates for February will be out on Wednesday and could ensure a Euro slump if they show estimates for a dip.

Concluding what may be a poor week for Euro to Pound exchange rates, Eurozone manufacturing PMIs out on Thursday are tipped to show falling activity.

The one potential saving grace will be Thursday morning’s Eurozone unemployment rate announcement, which covers January.

The jobless rate reported is tipped to have fallen to 8.6% in January, but whether such a result outweighs any negativity from slowing inflation remains to be seen.

The UK will have a quieter week ahead, with the main announcements consisting of manufacturing and construction PMI readings out on Thursday and Friday.

Economists are predicting minimal shifts in February’s readings, so Pound to Euro movement may ultimately be decided by single currency movement.