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Euro to Pound (EUR/GBP) Currency Pair Weakens as ECB Meeting Draws Closer

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The Euro to Pound (EUR/GBP) exchange rate was mixed on Tuesday following the release of disappointing economic data in both the Eurozone and United Kingdom.

Data out of the UK showed that construction activity expanded at its slowest pace in over a year in November as order books filled at the slowest pace since June 2013 and optimism waned in the sector.

According to Markit/CIPS, the UK construction PMI fell to a reading of 59.4 in November, the weakest level since October and was a sharp drop from the preceding month’s figure of 61.4.

Economists had been forecasting for a decline to 61.0.

‘A less favourable overall economic news flow was cited as the key factor dampening otherwise buoyant demand patterns across the UK construction sector,’ said Tim Moore, senior economist at Markit.

The biggest fall in activity was recorded in the civil engineering sector, which relies heavily on government-backed projects. The weakness looks set to be reversed however as speculation grows that chancellor George Osborne will announce a massive road building and flood defence programme in Wednesday’s Autumn statement.

The Euro meanwhile was unable to take advantage of the soft UK data as a report showed that producer prices across the Eurozone fell more than forecast in October, adding to mounting fears over subdued inflation pressures.

According to the data, the producer price index for the region fell by -0.4%, a sharp fall from Septembers rise to 0.2% and was worse than economist expectations for a decline of -0.3%. On an annual basis, the PPI fell by 1.3%, below last month’s figure but largely in line with expectations.

The fall in the PPI adds to concerns over steadily falling inflation and increases pressure on the European Central Bank (ECB) to introduce further measures to encourage economic growth and tackle the threat of dangerously low inflation. Speculation is building that the bank could be forced to introduce a sovereign quantitative easing programme next year.

Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast

The Euro to Pound exchange rate is forecast to fall ahead of Thursdays ECB interest rate announcement and press conference. Another week of disappointing economic data out of the embattled Eurozone has led to economists raising their bets that the central bank must do more to support the stagnating economy.

‘The ECB might just be powerless. There are domestic political constraints about which, at the EU level, they can do nothing. The crowd, which is yelling for stimulus, is basically southern Europe. They say the ECB should do its duty, whatever the governments do,’ said Daniel Gros, Director at the Centre for European Policy Studies in Brussels.

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,1.2391 ,
Euro,,British Pound,0.7923 ,
Euro,,Australian Dollar,1.4659 ,
Euro,,Canadian Dollar,1.4121 ,

As of 16:35 pm GMT