German CPI Shows No Increase in February
Preliminary figures for February have revealed that German inflation failed to grow by even the 0.1% forecast, dropping from 0.5% the previous month to 0% year-on-year (YoY). Month-on-month (MoM) consumer prices saw positive growth after deflation of -0.8% the previous month, but the 0.4% growth undercut forecasts by ten basis points.
Euro (EUR) Trending Around Opening Levels after Confidence Figures Decline
Sentiment in the Eurozone took a hit in February, with several measures of confidence across the Eurozone showing a worse-than-expected decline in sentiment. Economic Confidence dropped to 103.8, the Business Climate Indicator fell to 0.07, Industrial Confidence dropped to -4.4 and Services Confidence slipped to 10.6. Consumer Confidence remained pessimistic, although the reading of -8.8 remained unchanged on the previous month.
Today’s elections in Ireland have the potential to put an anti-austerity party in government, weakening EUR/GBP and EUR/USD. After taking a beating over the course of the week, Pound Sterling (GBP) is making modest advances today, despite a significant drop in consumer confidence. Meanwhile, the US Dollar is weak ahead of important growth data due for release later during the European session.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Soft on Irish Anti-Austerity Election Threat
Irish elections are currently underway, with economists and investors set to keep a close eye on the results. The main concern for the Eurozone is that anti-austerity party Sinn Féin could see a significant rise in the number of seats they win, with many predicting at least a doubling to over 20%. This would see the party become the third largest in Ireland in terms of representation and with the leader of the current ruling coalition, Fine Gael, anticipated to see their share of seats shrink, the chances of Sinn Féin ending up in joint control is a very real one for some economists.
While both of Ireland’s biggest and centre-right parties have ruled out a coalition with the left-wing group, it waits to be seen whether either would turn down the opportunity to be in government. This would make Ireland yet another Eurozone country with an anti-austerity leadership, on a list that currently includes Portugal and Greece, strengthening the backlash against widespread spending cuts as a tactic for economic recovery.
This fear has seen the Euro to Pound Sterling (EUR/GBP) exchange rate slump, despite a worse-than-expected drop in the UK’s GfK Consumer Confidence Survey. The results for the February survey dropped from 4 to 0, far further than the -1 point drop anticipated.
Approaching German Consumer Price Index data for February is also holding Euro investors back until after the data can be assessed.
Euro to US Dollar (EUR/USD) Exchange Rate: Common Currency Sinks further than Weakened ‘Greenback’
The US Dollar is weak on cool trader appetite today ahead of a slew of data releases, including the key Gross Domestic Product figures and the important Personal Income and Personal Spending releases. Investors are once again able to pay attention to tier one US data, now that the Federal Reserve has confirmed that any future rate hikes will depend upon the results. Yesterday’s Durable Goods Orders printed much better-than-forecast, but expectations of a rate hike were quashed by comments from Federal Reserve members James Bullard and Dennis Lockhart, who warned against increasing interest rates. The Fed funds futures market doesn’t currently anticipate a rate hike in 2016, so today’s data could either confirm or undermine investor sentiment.
Current EUR, GBP, USD Conversion Rates
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trading in the region of 0.7857, while the Pound Sterling to Euro (GBP/EUR) exchange rate is trending around 1.4014.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1006, while the US Dollar to Euro (USD/EUR) exchange rate is trading around 0.9082.