The Euro (EUR) exchange rate strengthened to its best level in a month against the weakened Pound (GBP) on Tuesday as data showed that economic sentiment in Germany and the Eurozone soared to a 4-month high this month.
Earlier in the session, the Pound continued to weaken against a number of peers including the US Dollar as data showed that UK inflation stayed close to its lowest level in five years, increasing speculation that the Bank of England will refrain from raising interest rates.
‘Inflation may have picked up but it is still low and there are plenty of things that could push it lower. We are bearish on the Pound. The BoE is likely to delay raising interest rates until late 2015. We expect tomorrow’s BoE minutes to be dovish,’ said a London based economist.
The Euro then advanced strongly against Sterling after data released by the ZEW Centre for Economic Research. Its index of German economic sentiment increased by 15.1 points to 11.5 this month from October’s reading of minus 3.6. The report smashed economist forecasts for a rise of 4.5 points to 0.9.
The report showed that current conditions improved from 3.2 to 3.3 in September, beating expectations for a fall to 1.3.
“The recent growth figures for the Euro area suggests that the economy is stabilizing, which contributed to the indicator’s increase. However, the economic environment remains fragile, not least due to ongoing geopolitical tensions,” says ZEW President Professor Clemens Fuest.
Also buoying the Euro was the separate ZEW report for the wider Eurozone region.
The data showed that economic sentiment across the 18-member currency bloc climbed to a reading of 11 in October, up from 4.1 in September and was far better than economist forecasts for a rise to 4.3.
The single currency also received some support from data which showed that European car sales jumped by 6.2% in October. The rise puts the market on course to making its first annual gain since 2007.
The strong ZEW data countered Monday’s losses that came because of European Central Bank President Mario Draghi reiterating that the bank was willing to implement additional stimulus measures that could include the buying of government bonds.
Euro traders will now be looking ahead to the release of Eurozone Current Account and Construction Output data releases. The Pound will be impacted by the publication of the BoE’s policy meeting minutes.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.2522 ,
Euro,,British Pound,0.8007 ,
Euro,,Australian Dollar,1.4352 ,
Euro,,Canadian Dollar,1.4151 ,