Thursday has seen fresh volatility for the Euro to Pound Sterling (EUR/GBP) exchange rate as investors show mixed reaction to the latest Eurozone CPI and UK GDP figures.
Improved German Consumer Confidence Shores up Euro to Pound Sterling (EUR/GBP) Exchange Rate Today
A stronger-than-expected German GfK Consumer Confidence Survey helped to boost the appeal of the Euro (EUR) this morning, after a lack of domestic data weighed the single currency down on Wednesday. Clocking in at 9.5 rather than 9.3, this seemed to suggest that sentiment within the Eurozone’s powerhouse economy was improving in spite of recent slowdown concerns.
Although the finalised Eurozone Consumer Price Index failed to rise by as much as expected the reading was nevertheless revised upwards from 0.2% to 0.3% in January. Given that weaker inflationary pressure is largely behind the European Central Bank’s (ECB) impetus to loosen monetary policy, this stronger showing seemed to reduce the chance of the central bank delivering more severe easing measures in March.
Pound Sterling (GBP) Recovers Ground as Mixed GDP Report Balances ‘Brexit’ Fears
Sterling’s (GBP) sharp downtrend tailed off further today after the finalised fourth quarter UK GDP figures proved more encouraging than pundits had anticipated. Growth on the quarter held steady at 0.5% rather than showing a downwards revision, suggesting that the domestic economy had not been as hampered by negative headwinds at the end of the year as feared.
However, the UK economy was shown to still be heavily reliant on the service sector and domestic demand as exports continued to contract. With ‘Brexit’ uncertainty expected to drag on growth and investment over the coming months, concerns persist over the domestic economic outlook as markets continue to push back the possibility of a Bank of England (BoE) interest rate hike. Consequently the Pound Sterling to Euro (GBP/EUR) exchange rate has struggled to hold any of its gains today.
EUR/GBP Exchange Rate Forecast: Euro to Cede Gains on Weaker German CPI
The UK’s GfK Consumer Confidence Survey is expected to show a weakening of sentiment from 4 to 3 which could push the Pound lower once again. Debate over the ‘Brexit’ issue is also likely to drive Sterling ahead of the weekend as business leaders and politicians continue to weigh into the matter.
On the other hand, the common currency may see a renewed bout of bearishness on Friday as the latest German Consumer Price Index report is released. Inflation within the Eurozone’s major economy is predicted to have slipped back from 0.5% to 0.1% on the year in February. A weaker result here would add further fuel to calls for the ECB to act decisively at its next policy meeting, denting the appeal of the Euro.
Current EUR, GBP Exchange Rates
At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was making gains around 0.7921, while the Pound Sterling to Euro (GBP/EUR) pairing was trending lower at 1.2624.