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Euro Slips against Pound but remains near 7-year High on Inflation News

The Euro has posted a fractional advance against the Pound on Friday afternoon’s session. This minor rise to an exchange rate of 0.9089 is a symptom of UK economic uncertainty outweighing a lack of decisive Eurozone data.

On Friday, Bank of England (BoE) official Michael Saunders gave a speech, calling on the BoE to be more ‘activist’.

This implies a greater level of micromanagement when it comes to BoE policy, which may mean policy loosening in the near-term.

(First published 10:02, August 11th, 2017)

The Euro has posted marginal losses against the Pound today, despite growth in the German inflation rate. On a quiet close to the week, Brexit developments have been the main source of Sterling movement.

  • EUR GBP rate slides to 0.9060 – GBP EUR trades up at 1.1037
  • Euro dips despite German inflation stats – Spanish prices drop in July
  • Pound ticks up on Brexit news – UK officials start ‘charm offensive’
  • Eurozone GDP upcoming next week – UK jobs stats in focus

At an exchange rate of 0.9068, the Euro remains near the best exchange rate against the Pound in over seven years.

Euro Drops despite Higher German Inflation

The Euro has fallen slightly against the Pound today, despite signs of higher German inflation.

For the finalised German figures in July, a rise from 1.6% to 1.7% has been recorded. Additionally, a monthly increase from 0.2% to 0.4% has also been seen.

Other Eurozone inflation figures were not so supportive, with Spanish inflation falling by -0.7% on the month in July.

Pound Advances as Brexit ‘Charm Offensive’ Begins

With UK domestic data lacking at present, the Pound has instead been influenced by wider Brexit news.

Despite being away from Downing Street during recess, Prime Minister Theresa May has still remained involved in ongoing Brexit negotiations.

The PM’s latest effort to bring progress in talks has been to initiate a ‘charm offensive’. According to government officials, UK diplomats and negotiators will explain the UK’s position to a wide range of European officials, with the aim of clarifying the situation.

The UK negotiating team has previously been accused of being vague by the EU side, so this is seemingly an effort to get a clearer message across to those in Brussels and elsewhere.

Weekly EUR GBP Forecast: Eurozone GBP in Focus Next Week

Compared to the more sporadic data releases this week, the coming week will see high-impact Eurozone data releases from Monday to Friday.

Initially, however, Eurozone industrial production figures will come out on Monday, which are expected to show declining growth.

The main German news will be released on Tuesday, consisting of a high-impact estimate for second quarter GDP growth. An annual rise from 1.7% to 2.1% is predicted, which could inspire Euro to Pound gains.

Following this will be Eurozone GDP stats for Q2, out on Wednesday. In a step up from the German predictions, GDP growth is anticipated on both the month and the year.

Moving onto Thursday, Eurozone inflation and trade will be the order of the day. The trade surplus is tipped to expand notably, but little change in inflation is expected. If the inflation figures disappoint, the Euro may decline due to lower expectations of a European Central Bank (ECB) interest rate hike.

Rounding off a packed week of Eurozone news will be Friday’s construction output measure for June. A marginal annual decline is forecast, but this may not be enough to devalue the Euro.

Next week will be less busy but still important for the UK, as traders wait for inflation, jobs and sales figures to come out.

Inflation stats on Tuesday are tipped to rise, from 2.6% to 2.7% on the year. With average earnings set to slow on Wednesday, these two outcomes could greatly weaken the Pound.

Higher inflation raises the chances of a Bank of England (BoE) interest rate hike, but if wage growth falls then the BoE could hesitate as this would put pressure on debt-ridden households.

With unemployment forecast to stagnate on Wednesday and retail sales expected to decline on Thursday, the Pound to Euro exchange rate could well decline going into the weekend.

Current Interbank EUR GBP Exchange Rates

At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.9066 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.1028.