Contracting German Producer Prices Fail to Weigh on Euro (EUR) Exchange Rate Today
The Euro (EUR) is back on stronger form ahead of the weekend in spite of weaker than expected German Producer Price Index figures, with investors continuing to bet on the odds of the European Central Bank (ECB) opting for fresh monetary loosening measures in March. As a result the Euro to Pound Sterling (EUR/GBP) exchange rate was trending higher at 0.7765, while the Euro to US Dollar (EUR/USD) pairing was making gains around 1.1120.
Despite a warning from a European Central Bank (ECB) policymaker the Euro (EUR) has strengthened today on the back of an unexpectedly improved Eurozone Current Account.
Wider Eurozone Surplus Bolsters Euro to US Dollar (EUR/USD) Exchange Rate Today
Some of the strength of the Euro (EUR) was lost yesterday as investors reacted to comments from European Central Bank (ECB) policymaker Ewald Nowotny. Suggesting that markets might be pricing in more action than the central bank is capable of delivering at this juncture, Nowotny counteracted the bullish influence of earlier comments from ECB President Mario Draghi. As this seemed to indicate a belief that Draghi would once again fail to deliver on his promises of further stimulus the single currency was quick to slump across the board.
As the Eurozone’s Current Account surplus unexpectedly widened this morning, however, the single currency has been making some fresh gains against rivals. This stronger showing seems to suggest that the currency union is not experiencing such severe downside pressure as the result of global slowdown concerns, boosting the Euro.
Dovish Fed Minutes Prompt US Dollar (USD) Downtrend
The US Dollar (USD) has been on more bearish form in the wake of the January Federal Open Market Committee (FOMC) meeting minutes, as policymakers were clearly reluctant to tighten monetary policy further in the near future. This dovish tone undermined the impact of January’s stronger-than-expected Industrial and Manufacturing Production figures, which indicated that the world’s largest economy remained robust.
However, as tomorrow’s baseline Consumer Price Index is expected to show a strong uptick on the year from 0.7% to 1.3%, the ‘Greenback’ could rally. A stronger level of inflationary pressure would somewhat vindicate the Fed’s decision to hike rates in December, although the odds for a March interest rate raise are likely to remain low.
Pound Sterling (GBP) Exchange Rate Volatile ahead of EU Summit
Demand for Pound Sterling (GBP) has continued to decline after the latest raft of UK employment data failed to impress traders. Despite a better-than-expected drop in jobless claims the ILO Unemployment Rate failed to dip as forecast, while wage growth remained stubbornly muted. Altogether this did not offer the most encouraging picture of the UK’s continued economic strength, increasing the odds of the Bank of England (BoE) maintaining its current dovish bias for longer.
Equally adding downward pressure to the Pound at present are the somewhat fraught negotiations over the UK’s relationship with the rest of the EU, as Prime Minister David Cameron may struggle to secure agreement at tonight’s summit of European leaders. With vocal opposition from a number of countries, including Poland and the Czech Republic, the prospect of a June referendum seems to be receding.
Current EUR, USD, GBP Exchange Rates
At the time of writing, the Euro to US Dollar (EUR/USD) exchange rate was making gains at 1.1138, while the Euro to Pound Sterling (EUR/GBP) pairing was trending lower around 0.7780. Meanwhile, the Pound Sterling to US Dollar (GBP/USD) exchange rate was on an uptrend in the region of 1.4321.