Pound Sterling (GBP) Exchange Rate Softens ahead of UK Inflation Data Today
In spite of hopes that the latest UK Consumer Price Index will show an uptick in inflationary pressure Pound Sterling (GBP) has continued to trend lower against the majors on Tuesday morning. Consequently the Pound Sterling to Euro (GBP/EUR) exchange rate is slumped at 1.2741, while the Pound Sterling to US Dollar (GBP/USD) pairing has been ceding ground around 1.4263.
As divisions grow within the ruling Conservative party the outlook of the UK economy appears more muted on Monday morning, driving investors to move away from Pound Sterling (GBP).
UK Budget Fallout Continues to Weigh on Pound Sterling (GBP) Exchange Rate
Despite the Rightmove House Prices Index showing growth on the year in March, the Pound (GBP) has slumped across the board on Monday morning. Traders are continuing to digest the implications of Chancellor George Osborne’s latest budget, particularly after planned cuts to disability benefits prompted Work and Pensions Secretary Ian Duncan Smith to unexpectedly resign. With a growing rift within the Conservative party confidence in the outlook of the UK economy has naturally faltered.
Tomorrow’s UK Consumer Price Index report could shore up Sterling, however, as annual inflation is forecast to have ticked up from 0.3% to 0.4%. Although this would still remain a long way from the Bank of England’s (BoE) 2% target, any signs of increased inflationary pressure would likely offer some measure of reassurance to investors.
Euro Currency News: EUR Struggles to Make Gains on ECB Dovishness
The Euro (EUR), meanwhile, is on mixed form against rivals this morning as the appeal of the US Dollar (USD) increases. Markets had reacted with some trepidation to policymaker Peter Praet’s suggestion that the European Central Bank (ECB) could still cut interest rates lower and may even consider the implementation of so-called helicopter money in order to boost inflation within the Eurozone. As this undermined previous speculation that the central bank was out of ammunition, the single currency saw some renewed softness in response.
Comments from ECB policymaker Benoît Cœuré on Monday have stirred markets further, as Cœuré highlighted the need for increased financial integration between member states and indicated that central banks alone cannot solve the current economic problems. With little in the way of domestic data to focus on this has failed to particularly improve the appeal of the Euro today.
US Dollar (USD) Exchange Rate Trends Higher ahead of Home Sales Data Today
While Friday’s University of Michigan Confidence Index printed well below market expectations, to clock in at 90.0 rather than 92.2, the ‘Greenback’ trended higher ahead of the weekend. As the initial dovish impact of the Fed’s latest monetary policy meeting continued to recede, the US Dollar returned to more bullish form as it recovered much of its recent losses.
Some of this renewed demand for the US Dollar may be withdrawn this afternoon if February’s Existing Home Sales shows the forecast contraction on the month, however. With the economic strength of the US somewhat in question, any signs of weakening within the domestic housing market are likely to dent the ‘Greenback’, strengthening the argument for the Fed to remain on hold for longer with regards to interest rates.
Current GBP, EUR, USD Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending lower at 1.2797, while the Pound Sterling to US Dollar (GBP/USD) pairing was slumped around 1.4413. Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate was trending in the region of 1.1263.