Weakening German Producer Prices Fail to Weigh on Demand for Euro (EUR) Exchange Rate Today
Sentiment towards the Pound (GBP) has remained bearish on Wednesday as traders lack confidence in the currency ahead of the latest raft of UK employment data, with little hopes that the Bank of England (BoE) will be prompted into raising interest rates in the near future. Despite German Producer Prices having printed disappointingly this morning the Euro (EUR), meanwhile, has continued to make gains against rivals. Consequently the Euro to Pound Sterling (EUR/GBP) exchange rate has been on an uptrend at 0.7747 this morning.
Pound Sterling (GBP) Exchange Rate Softened as Odds of Near-Term BoE Interest Rate Hike Diminish
Bank of England (BoE) Governor Mark Carney proved particularly dovish today, indicating that interest rates are likely to remain unchanged for some months to come. Seeming to snuff out expectations of a second quarter rate hike, Carney’s words helped to push the Pound (GBP) into a sharp downtrend across the board. As a result the Euro to Pound Sterling (EUR/GBP) exchange rate has been on an uptrend around 0.7695 on Tuesday afternoon.
Demand for Pound Sterling (GBP) has remained bullish this morning after inflationary pressure within the UK was revealed to have risen slightly in December.
ECB Dovishness Weighed on Euro (EUR), Pound Sterling (GBP) Boosted after Weaker UK House Price Data
In spite of persistent market volatility on Monday the Euro (EUR) nevertheless began to soften somewhat against rivals, as a falling oil price failed to prevent traders from engaging in a round of profit taking. European Central Bank (ECB) policymakers appear to remain divided over the need for further monetary loosening measures in the immediate future ahead of this week’s policy meeting, with the mounting downside risks to the Eurozone prompting more dovish sentiment.
After Rightmove House Prices were revealed to have slowed on the year in January from 7.4% to 6.5% the Pound (GBP) was encouraged to edge higher, bolstered by the prospect of a deflating housing market bubble. Pundits have equally been buying into the weakened currency after suggestions that Sterling had been generally oversold following some of last week’s more disappointing domestic data.
Increasing UK Inflation Softens EUR/GBP Exchange Rate as German CPI Remains Weak
Investor confidence was shored up further today, despite Chinese economic growth having slowed to a twenty-five year low, as markets bet that fresh stimulus measures are on the horizon for the world’s second largest economy. As markets had largely been anticipating a continued slowdown, safe-haven demand has not seen any particular increase, with the single currency trending lower in response to unimpressive Eurozone data. While there was no change in Germany’s finalised December Consumer Price Index the persistently weak level of inflation within the Eurozone’s powerhouse economy has done little to encourage traders to favour the single currency today.
There was no particular surprise as the UK Consumer Price Index demonstrated a minor uptick in inflationary pressure on the year in December, rising from 0.1% to 0.2%. However, as baseline inflation on the month and year-on-year core inflation were found to have unexpectedly risen this ultimately proved more encouraging to traders. Although domestic inflation remains a long way short of the Bank of England’s (BoE) 2% target this improvement nevertheless offers hope that a continued uptrend might be expected.
EUR/GBP Exchange Rate Forecast: Dovish BoE Comments Predicted to Soften Pound Sterling Today
Later this morning BoE Governor Mark Carney is due to speak in London, potentially addressing the subject of when the central bank might reasonably be expected to begin tightening monetary policy once more. Given the dovishness of recent comments, however, Carney could prompt the Pound to trend lower, particularly if there is any suggestion of interest rates remaining on hold throughout the coming year.
With the German ZEW Economic Sentiment Survey expected to show a decline in confidence within the major Eurozone economy, however, the common currency could remain on more bearish form throughout Tuesday.
Current EUR, GBP Exchange Rates
At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was slumped around 0.7591, while the Pound Sterling to Euro (GBP/EUR) pairing was making strong gains at 1.3172.