The Euro to Pound Sterling (EUR/GBP) exchange rate recovered some ground on Thursday as investors deemed the Euro’s run of losses as overdone and as inflation in Germany rallied in February.
Data released by Destatis showed that consumer prices in the Eurozone’s largest economy rose back into positive territory in February to 0.1%.
On Wednesday, The Euro to Pound Sterling (EUR/GBP) exchange rate continued its sharp declines on Wednesday as the European Central Bank’s quantitative easing programme begins to bite and as Bank of England governor Mark Carney said that it would be foolish for the bank to cut interest rates.
The Euro to Pound Sterling (EUR/GBP) exchange rate slipped to a session low of 0.7012
Traders widely shrugged off UK economic data releases, which showed that industrial and manufacturing production fell unexpectedly last month.
According to the Office for National Statistics, manufacturing production fell by 0.5% in January, surprising economists who had been forecasting for a rise of 0.2%. On an annual basis, production rose at a rate of 1.9%, below expectations for a gain of 2.6%.
The data also showed that industrial production fell by 0.1% in January, below expectations for a gain of 0.2%.
‘Today’s figures from the ONS show manufacturing output grew by 2.6% in the three months to January compared to a year ago. The UK has seen the fastest growth in the G7 but is not immune to the risks facing the global economy,’ said a spokesperson from the Treasury.
Market attention continued to focus on comments made by BoE governor Mark Carney on Tuesday. Carney said that the bank would not consider cutting interest rates as the current period of low inflation was down to the sharp fall in oil prices.
“The thing that would be extremely foolish would be to try to lean against this oil price fall today and try to provide extra stimulus to try to get inflation up at this point in time. The impact of that extra stimulus …would happen well after the oil price fall had moved through the economy and we would just add unnecessary volatility to inflation. That would be foolish,” Mr Carney told the House of Lords economic affairs committee.
The markets took the comments as a sign that the Bank’s next rate move will be an upward one, something that highlights the diverging monetary policy of the BoE and ECB.
Also continuing to weigh upon the single currency are concerns over the Greek situation.
Time is running out for Greece as its creditors said that planned economic reforms do not go far enough. The standoff is set to continue as Prime Minister Alexis Tsipras said that it is his firm intention to seek war reparations from Germany.