GBP/EUR Rallies then Slips on Tuesday
- UK Rightmove House Price Data Mixed – Up year-on-year, down month-on-month
- Update: ‘Brexit’ Bets Down – ORB phone poll reveals stronger ‘Remain’ lead
- Euro Remains Uninspired – Mixed Eurozone GDP from Friday hinders Euro
- Update: British CPI Poor – Holds Sterling down after ‘Remain’ bullishness
The Pound to Euro exchange rate experienced a rally of around 100 pips through Monday evening into Tuesday morning as investors reacted to new EU referendum polls.
The ORB telephone poll by The Telegraph continued to be a particular source of investor confidence, showing that the ‘Remain’ camp had now risen 4 points while the ‘Leave’ campaign dropped by 3.
Unfortunately, the Pound’s bullishness was largely stumped later on Tuesday after Britain’s Consumer Price Index (CPI) report proved disappointing.
Monthly inflation slowed from 0.4% to 0.1%, undermining the predicted slow to 0.3%. Meanwhile, the year-on-year print let down expectations of remaining at 0.5% by slipping to 0.3%. At the time of writing, GBP/EUR trended in the region of 1.2767.
GBP/EUR Fluctuates Ahead of Inflation Data
The Pound to Euro exchange rate failed to show any direction throughout Monday’s session. At the time of writing, GBP/EUR was trending in the region of 1.2705 after hitting a daily low of 1.2674 and a high of 1.2712.
Eurozone trade had been especially quiet on Monday as major Eurozone markets such as Germany and France were closed to observe the Whit Monday bank holiday.
However, with the UK’s inflation data due for publication shortly, GBP/EUR exchange rate volatility can be expected.
A slower rate of consumer price growth would be Pound-negative while an uptick in inflation could improve interest rate bets and send Sterling higher.
The Pound Sterling to Euro (GBP/EUR) exchange rate enjoyed a solid climb of 50 pips during last week’s session, but its rally seems unable to continue this week as the Pound has already slipped from its opening levels as ‘Brexit’ rows continue.
GBP/EUR has fluctuated narrowly since markets opened this week, hitting a low of 1.2676 and a high of 1.2708. At the time of writing, the pair trended in the region of 1.2692.
‘Brexit’ Warnings Take Hold Amid Quiet Economic Calendar
With British data largely quiet since last week’s ‘Super Thursday’, the Pound has been left relatively limp as it falls victim to the latest ‘Brexit’ warnings.
Rightmove house price data did little to influence Sterling movement as property price growth slowed from 1.3% to 0.4% month-on-month, but improved from 7.6% to 7.8% year-on-year.
‘Super Thursday’, a name used for the day on which the Bank of England (BoE) announces both its rate decision and inflation forecast, saw the Pound advance last week after policymakers agreed unanimously to freeze rates, with no signs of a cut being desired at this time.
The central bank also issued warnings on the possibility of the UK leaving the European Union in June, calling a ‘Brexit’ the biggest risk to Britain’s economy. BoE Governor Mark Carney even hinted that a technical recession was among the potential consequences.
While the Pound did not plummet due to a ‘Brexit’ still largely being perceived as unlikely by analysts, the headline focus on these rows over the weekend left Sterling limp.
Monday morning saw the Confederation of British Industry (CBI) cutting its economic growth forecasts from 2.3% to 2.0% in response to ‘Brexit’ warnings harming businesses, according to the BBC.
While CBI boss Carolyn Fairbairn cited that ‘Brexit’ uncertainty was affecting spending plans, she also said that the revised estimates were made under the assumption that the UK would remain in the EU.
Euro (EUR) Remains Flat after Friday’s Mixed GDP Reports
The Euro failed to see much definitive movement during last week’s session, something which did not change after Friday’s slew of highly anticipated releases, including preliminary Eurozone Gross Domestic Product (GDP) and final German Consumer Price Index (CPI).
German data was largely positive. Final CPI results came in as expected, continuing a contraction of -0.1% year-on-year and contracting at its forecast level of -0.4% month-on-month. German GDP impressed investors by jumping from 0.3% to 0.7% quarter-on-quarter and climbing from 1.3% to 1.6% year-on-year.
General Eurozone GDP, on the other hand, disappointed analysts by slowing slightly. Expected to remain steady at 0.6%, GDP slipped to 0.5% quarter-on-quarter, while the yearly print slowed from 1.6% to 1.5% despite projections that it would hold onto 1.6%.
As a result of the heavily mixed data, the Euro failed to take point as GBP/EUR traders continued to focus on Britain’s ‘Super Thursday’.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: British CPI Due Tuesday
Tuesday looks set to be a highly important day for the GBP/EUR exchange rate as a slew of British data is due for release, with most investors anticipating April’s key Consumer Price Index (CPI) reports.
Figures are estimated to remain at 0.5% year-on-year while slowing from 0.4% to 0.3% month-on-month. Analysts are likely to particularly focus on this indication of inflation in response to recently lowered outlooks for the British economy due to ‘Brexit’ fears.
Lloyds Bank said of the UK’s upcoming inflation report: ‘We continue to anticipate that a modest recovery in domestic cost pressures, especially via faster pay growth from 2016 H2, will underpin headline inflation’s continued crawl back towards the 2% target.’
Tuesday also sees the release of UK Producer Price Index (PPI) reports, as well as updates to the Eurozone’s trade balance figures.
Wednesday’s session follows with another run of influential data, including UK jobless claims and final Eurozone CPI reports.
The Pound Sterling to Euro (GBP/EUR) exchange rate currently trends in the region of 1.2692, while the Euro to Pound Sterling (EUR/GBP) exchange rate trends around 0.7878.