The Euro (EUR) has continued to advance against the Pound (GBP) today, hitting a pairing exchange rate of £0.8757.
This appreciation follows more good news from Germany – inflation in May is estimated to have risen above forecasts.
Higher inflation in Germany has been taken as a positive development, because it might mean a European Central Bank (ECB) interest rate hike in 2018.
More immediately, it could also mean that Thursday morning’s Eurozone inflation rate figures rise above the expected level.
(Last updated 30th May, 2018)
Falling German Jobless Rate and Rising Eurozone Confidence Push EUR/GBP Exchange Rate Higher
The Euro (EUR) has firmed against the Pound (GBP) today, rising by 0.6% in the pairing.
This advance comes after news of a surprise reduction in Germany’s unemployment rate during May.
The jobless rate fell from 5.3% to 5.2% during the month, putting unemployment at its lowest level since reunification in 1990.
A spread of Eurozone confidence measures also beat expectations; business sentiment and consumer inflation expectations both rose above forecasts.
Italian Government Limbo Continues to Limit EUR/GBP Exchange Rate Gains
Today’s good economic news out of the Eurozone has been marred by Italy’s political troubles, preventing further Euro to Pound (EUR/GBP) exchange rate gains.
The country is still without a functioning government, following the collapse of coalition talks over the weekend.
At present, the two largest parties are considering restarting the talks, but analysts believe that Italy will face another general election in a matter of months.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Drops -0.6% as Brexit Fears Lower Trader Confidence
Despite the ongoing Italian political crisis, the Pound (GBP) has still fallen sharply against the Euro (EUR) today in addition to declining against other currency peers.
This poor performance is partly down to recent UK economic forecasts, which have been negative for the most part.
Former Bank of England (BoE) policymaker Andrew Sentance has drained trader confidence by stating:
‘Even allowing for the weather, the UK continues to underperform relative to its major trading partners.
‘UK GDP is just 1.2% up on a year ago, compared with a 2.5% increase in the Eurozone and a rise of nearly 3% in the US.
‘The UK economy also continues to suffer from very weak productivity growth. In both the US and the Eurozone, GDP is rising 1%-1.5% faster than employment.
In the UK, GDP and employment are increasing at the same rate, which suggests that productivity is flat and not increasing at all.’
Euro to Pound Exchange Rate Forecast: Will EUR/GBP Advance Further on German Inflation Data?
The Euro (EUR) may be able to make greater gains against the Pound (GBP) this afternoon, when German inflation rate data for May comes out.
Preliminary readings are forecast to show faster price growth on the month and the year, which may lead to higher Eurozone-wide inflation.
Such a possibility could strengthen the Euro, as it would mean a greater chance of the European Central Bank (ECB) raising interest rates.
Thursday could bring greater support for the Euro to Pound (EUR/GBP) exchange rate, if the morning’s overall Eurozone inflation figures show growth in May.
Another potential Euro-booster on Thursday will be April’s Eurozone unemployment rate reading, which is set to drop from 8.5% to 8.4%.
The only notable UK data on Thursday will be an early measurement of consumer confidence in May.
GfK’s sentiment score is forecast to improve, which might trigger a small GBP/EUR exchange rate rise before the Eurozone inflation and jobs market stats come out.