Pound (GBP) Dented Slightly by Eurozone CPI
Data released earlier today had Eurozone Consumer Price Index (CPI) figures more or less matching analyst forecasts, with the monthly score coming in at the expected 1.2%.
The year-on-year print, on the other hand, impressed investors slightly more with a score of 0.0%, despite projections of -0.1%.
GBP/EUR remained largely uninspired however as ‘Brexit’ worries continued to weigh on investors of both currencies, and the Bank of England’s (BoE) minutes unveiled little more than a stern warning on the effects of an EU-less Britain.
Pound (GBP) Gains Almost 0.6% Vs. Euro (EUR)
As investors settle ahead of tomorrow’s key data releases and react to today’s disappointing industrial production data for the Eurozone, the Pound has been allowed to enjoy yet another sustained gain against the Euro (EUR).
The GBP/EUR pair rallied to 1.2610 before falling back to trend in the region of 1.25 ahead of the Bank of England’s (BoE) interest rate announcement.
Positive commentary from the central bank could boost the Pound, but any indications that interest rates could be cut in the event of a ‘Brexit’ would weigh on the British currency.
- ICM Poll Shows ‘Brexit’ Lead – ‘Leave’ campaign has 3 point lead over ‘Remain’.
- UK CPI Shoots Pound to Higher Ground – GBP finds footing after bullish Tuesday.
- IMF Releases Dovish Predictions – ‘Brexit’ to affect Europe, growth outlook cut.
- Euro Volatility Worsens – ECB and EU Referendum concerns weaken shared currency
The Pound Sterling to Euro (GBP/EUR) exchange rate seems to be holding near its week high of 1.2554 thanks to Tuesday’s positive UK CPI. Statements and poll data regarding the EU referendum released last night have had little to no effect on GBP/EUR levels.
Now around 150 pips up from the week’s opening levels of 1.2395, the Pound rallied on Monday and Tuesday. While it briefly faltered yesterday afternoon, a weakened Euro failed to hold it down and it currently trends up almost 0.4% at around 1.2578.
Pound Sterling (GBP) Holds Its Ground Despite ‘Brexit’ Bets
Yesterday’s British datasets seem to have been a blessing for the Pound, at least in the GBP/EUR pairing as the gains made on better-than-expected CPI have been largely sustained.
The key year-on-year print came in at 0.5%, 0.2% higher than the previous score of 0.3% and above the predicted figure of 0.4%
While the Office for National Statistics (ONS) cites a brief hike in air fare prices for the hawkish release, inflation will need to continue to edge higher in the coming months if it is to meet Bank of England (BoE) targets of 2.0%.
In EU referendum news, ICM have released an updated poll with results showing that 45% of participants voted to ‘Leave’ the European Union in June.
This marks a 3% lead over the 42% currently held by the ‘Remain’ camp, and anxieties that Britain could really ‘Brexit’ are responsible for the Pound’s current comparative weakness.
IMF Statements and Eurozone Industrial Production Slump Hold Down Euro (EUR)
Normally, poll results like the ICM’s would send the Pound reeling against its major rivals – however the International Monetary Fund (IMF) made ‘Brexit’-related statements yesterday that have also inspired caution towards the Euro.
As well as cutting the outlook for Eurozone growth, claiming that the European Central Bank’s (ECB) forecasts will not be met, the IMF also mentioned that the UK leaving the EU could have dangerous, lasting effects on Europe and the global economy.
The IMF’s current prediction for Eurozone expansion is now 1.5% for 2016 and 1.6% for 2017. This comes after the organization previously predicted 1.7% for both years in January.
The ECB was advised to continue using low rates, though ECB easing has already faced the scorn of some German officials. German Finance Minister Wolfgang Schaeuble has been particularly critical over the past week, blaming ECB president Mario Draghi for increased right-wing success in Germany.
Lastly, the Euro is weighed down by fresh Eurozone industrial production reports, which scored below 1.3% forecasts in the year-on-year print. The 0.8% figure disappointed investors after the previous score of 2.9%, allowing GBP/EUR to continue gaining.
Pound Sterling to Euro Exchange Rate Forecast: GBP/EUR Fluctuations Likely
With both major currencies weakening as the historic EU referendum vote in June draws closer, movement in the GBP/EUR pairing could become increasingly jerky.
In terms of future catalysts for movement, the ECB’s Nowotny is expected to speak in New York this evening, but analysts suggest it is unlikely he will make any considerable statements on the ECB’s plans going forward.
In the absence of solutions to ongoing British or Eurozone issues, investors are likely to bide their time ahead of tomorrow’s key Bank of England (BoE) rate decisions. With the benchmark interest rate currently expected to be kept at 0.50%, the bank’s policymakers are likely to make statements hinting at UK’s monetary future and may even discuss the possibility of a ‘Brexit’.
The Pound Sterling to Euro (GBP/EUR) exchange rate currently trends in the region of 1.2578, while the Euro to Pound Sterling (EUR/GBP) exchange rate trends around 0.7950.