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Euro Pound (EUR/GBP) Exchange Rate Nosedives as ECB Minutes Spook Markets

EUR/GBP Exchange Rate Weakened by Dovish ECB Minutes

The Euro Pound (EUR/GBP) exchange rate plummeted on Thursday as the pairing was pressured by some lacklustre Eurozone production figures and some cautious minutes from the ECB.

This saw the EUR/GBP exchange rate nosedive over 0.7% at one point on Thursday as the pairing struck its lowest levels since May last year.

Euro (EUR) Pressured by Lacklustre Production Figures

The Euro first found itself sliding against the Pound on Thursday morning following the release of the Eurozone’s latest industrial production figures.

According to data published by the Eurozone’s statistics agency, the industrial production across the bloc fell for the second consecutive month in February as it slumped from -0.6% to -0.8%.

This left it well below market expectations that factory output would have grown by 0.1%.

Analyst suggest that is the latest indicator that growth in the Eurozone has begun to peter out after racing higher in 2017.

Peter Vanden Houte, chief Eurozone economist at ING, said

‘It seems as if the upbeat economic figures for the Eurozone have left for a spring break vacation.

Indeed, as most indicators have undershot expectations over the last two months, the risk of a growth deceleration in the first quarter is now very real.

To be sure, we still believe that 1Q GDP growth will come out close to 0.5 per cent, but the growth momentum is clearly slowing.’

Single Currency Plummets on ECB Caution

The most dramatic movement in the EUR/GBP exchange rate can yesterday afternoon however as the European Central Bank (ECB) published the minutes from its latest policy meeting.

The accounts revealed that ECB policymakers are concerned that growing trade protectionism and the recent strength of the Euro may pose some risk to the Eurozone’s continued growth as well as inflation.

The minutes read;

‘There was broad agreement among members that volatility in the exchange rate of the euro continued to be a source of uncertainty, which required monitoring with regard to its possible implications for the medium-term inflation outlook.’

While policymakers observed that inflation was strengthening it warned that price pressure was still not sufficient and that an ample degree of monetary policy accommodation would still be required to bring inflation in line with targets.

Fears that this could see the ECB leave rates on hold for the foreseeable future prompted the Euro Pound exchange rate to tumble to a new 10-month low.

EUR/GBP Forecast: Eurozone Trade Figures to Bolster Euro?

Looking ahead the EUR/GBP exchange rate may look to strike higher later this morning following the release of the Eurozone’s latest trade balance figures.

Economists forecast that today’s data will reveal that the bloc’s trade surplus rebounded from €3.3bn to €20.2bn in February.

Meanwhile the focus for GBP investors is likely to turn to next week’s session and the release of the UK’s latest wage and inflation figures.

A lot of attention is likely to be placed on the key figures next week as markets attempt to gauge at what pace the BoE is likely to tighten its monetary policy this year and whether they may be enough economic slack for up to two rate hikes and some forecasters suggest.