Sterling (GBP) Set to Move on Imminent UK CPI Figures Today as Forecasts Predict Reduction in Inflation
A stronger-than-expected Industrial Production figure for the Eurozone yesterday saw the GBP/EUR exchange rate temporarily return to dovish territory, however, as stock markets remained sluggish on the back of a relatively uneventful day of data the pairing soon settled back into a narrower positive trend. Ahead of this morning’s UK Consumer Price Index for August the Pound (GBP) is holding ground, in spite of general expectations for domestic inflation to have fallen to 0%. At time of writing the GBP/EUR conversion rate is moving in the range of 1.3663.
The Euro (EUR) is trending bearishly this morning as investors brace for upcoming Eurozone Industrial Production figures and the Pound (GBP) capitalises to bolster the GBP/EUR conversion rate.
Pound (GBP) Dropped on UK Inflation Forecast Revision, Euro (EUR) Struggling with Fresh Grexit Worries
Ahead of the weekend the single currency (EUR) was slightly shored up by the finalised German Consumer Price Index data for August printing as expected, confirming the earlier provisional figure of 0.2%. Although this did suggest that the negative impact of recent stock market turmoil has been fairly limited upon the Eurozone’s prime economy the resultant rally was not long-lived. Grexit concerns, which have begun to flare up once more in the run-up to this week’s Greek general election, have weighed significantly on the Euro to prevent it from taking much advantage of any weakening rivals. Saturday’s meeting of Eurogroup Finance Ministers produced another strong affirmation that there would be no renegotiation of bailout terms regardless of whatever government may emerge from these latest elections, insisting that work must go ahead on the conditional reforms which had been agreed.
After having recovered some of its strength on the back of less dovish than expected Bank of England (BoE) meeting minutes on Thursday, the Pound (GBP) returned to bearish form with the release of the BoE’s 12-month Inflation Forecast. As the Monetary Policy Committee (MPC) revised down its previous inflation projection from 2.2% to 2% this seemed to undercut the level of cautious optimism policymakers had expressed with concerns to progress on domestic interest rates. Given that much of the last week’s UK economic data had not suggested a particularly robust state of recovery in the nation’s economy, this admission of doubt was quick to push the GBP/EUR exchange rate down to a near-weekly low of 1.3597.
Single Currency (EUR) on Downtrend ahead of Eurozone Industrial Production Today, GBP/EUR Pairing Climbs
Today’s only major data release for the pairing will be the year-on-year Eurozone Industrial Production figure for July, which has the potential to cause a substantial resurgence for the GBP/EUR pairing with the revelation of a larger decrease in growth than has been forecast. The ongoing global slowdown and previous Grexit worries are likely to have had at least some degree of impact on the industrial output of the currency bloc, although the full extent still remains to be seen. However, a surprisingly strong result here could equally see the Euro boosted on a renewed surge of optimism with the reassurance of investors.
GBP/EUR Exchange Rate Forecast: Pound Looks to Rally on Upcoming UK Consumer Price Index
A greater degree of movement should be expected for the pairing tomorrow, as UK Consumer Price Index data and the German ZEW Economic Sentiment Survey are due for publication. Further evidence of decline in the British economy would ultimately see demand for Sterling shrink once again, but if a positive showing can counteract the relative pessimism of the BoE Inflation Forecast the GBP/EUR conversion rate could be buoyed out of its current bearish trend.
While concerns over Greece are likely to dominate the outlook of the common currency for the remainder of the week, optimistic second quarter Eurozone Employment may prove strong enough to combat this dovish influence, albeit only temporarily. Should the results of ZEW surveys fall short of expectations, however, the Euro stands to enter a fresh slump.
Current GBP, EUR Exchange Rates
At time of writing the Pound Sterling to Euro (GBP/EUR) exchange rate is on an uptrend at 1.3627, while the Euro to Pound Sterling (EUR/GBP) pairing is shedding value in the range of 0.7336.