The Euro firmed against the Pound on Monday despite the release of data which showed that construction output in the 18-member Eurozone fell in March.
The single currency was able to edge higher against its UK peer after Bank of England Governor Mark Carney warned on Sunday that the nation’s housing market is posing the biggest risk to the UK’s economic recovery.
With no market moving data due today the market is taking its direction from the house price data released over the weekend.
According to property website Rightmove the average price for a property in the UK soared by 9% in a year, sending the average price of a property to a record high level of £272,003 in May. The annual increase was the biggest recorded since October 2007.
“The biggest risk to financial stability, and therefore to the durability of the expansion- those risks centre in the housing market, and that’s why we are focused on that. We don’t want to build up another big debt overhang that is going to hurt individuals and is very much going to slow the economy in the medium term,” said BoE governor Mark Carney in a television interview.
He added that a lack of housing was forcing up prices. Carney added that the BoE was unable to solve the housing shortage issue. Just 123,000 new homes were built per year, well below the 200,000 economists believe are needed to meet demand.
In the Eurozone a report released by Eurostat showed that construction in the Eurozone fell by 0.6% from February, but was up 5.2% from the same time in the previous year.
During the first quarter of 2014 construction grew by 2.3% from the previous quarter. Investors will be worried that the decline at the end of the first quarter will add to signs that the region’s recovery stalled as both industrial production and exports also fell. Germany saw a large decline in Construction.
As weak data continues to be published for the Eurozone investors are raising their bets that the European Central Bank will introduce new monetary easing measures at June’s policy meeting.
Euro to GBP Update on 20/05/14
The Euro fell against the Pound on Tuesday as inflation data out of the UK came in better than forecast.
Early in the session the Euro softened after data showed that producer price inflation in Germany fell unexpectedly in April.
The cause for the decline was thought to be due to a sharp decline in energy prices. Prices at the factory gate fell 0.1% on a monthly basis and by 0.9% year-on-year. The figures were below economist expectations for an unchanged monthly figure and a fall of 0.8% year-on-year.
The Pound then surged against the Euro so that the GBP/EUR pairing breached the 1.23 mark.
Data released by the UK’s Office for National Statistics showed that inflation climbed to 1.8% in April from the 1.6% recorded in March. The rise is the first one recorded in ten months.
Consumer prices rose 0.4% month-on-month. Transport costs jumped 2%, with airfares surged 18% and sea fares by 22%. Food prices dropped 0.5%.
The inflation rate is still below the Bank of England’s target of 2%.