The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.67% on Tuesday afternoon.
British economic data printed relatively poorly on Tuesday morning which has seen the Pound dive versus the majority of its most traded currency counterparts. Of particular detriment was the non-core Consumer Price Index which showed the UK had fallen into deflation. The downtrend could be restrained, however, given that the Bank of England (BoE) had warned about the possibility of the UK falling into negative inflation for some time.
The shared currency, meanwhile, softened across the board despite reports that Greece is coming close to securing a deal to unlock bailout funds. The reason for the depreciation can be linked to expectations that, even if the rumours are confirmed, the German’s are unlikely to be satisfied with relaxed austerity measures. Adding to the Euro downtrend was a poor result from the German ZEW Survey for Economic Sentiment.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3907.
Pound Sterling (GBP) Exchange Rate Forecast to Soften Versus the Euro after UK Inflation and Core Inflation Declined
Tuesday’s British economic data produced particularly disappointing results, causing the Pound to soften versus the majority of its closest rivals. April’s Consumer Price Index failed to meet with the median market forecast of 0.0%, with the actual result at -0.1% on the year. The BoE have expressed concern for quite a while that the UK would fall into deflation, however Governor Mark Carney has stated that he believes the negative inflation will be short-lived. The core measure also failed to meet with the market consensus, having dropped to 0.8% on the year.
The Office for National Statistics (ONS) stated; ‘This is the first time the CPI has fallen over the year since official records began in 1996 and the first time since 1960 based on comparable historic estimates.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3823 today.
Euro (EUR) Exchange Rate Forecast to Soften Versus the US Dollar on German ZEW Survey
Although several reports indicating Greece is close to accepting a deal proposed by the European Commission have surfaced, the shared currency declined versus many of its most traded currency rivals. The depreciation can be linked to the fact that the reports have not been confirmed by either side. Additionally, if the austerity measures are too relaxed the German’s are very unlikely to approve such a deal.
Greek officials have stated that the Hellenic nation will run out of money by the end of May, so securing a deal needs to be sped up considerably. The long delays and drawn-out talks have only added to the negative sentiment, fuelling speculation that the opposing sides will fail to strike a balance.
The German ZEW Survey for Economic Sentiment failed to meet with the median market forecast figure of 49.0, withthe actual result falling to 41.9. In response to the poor German data, ZEW President Clemens Fuest said; ‘Financial market experts have adjusted their optimistic expectations downward in May due to unexpectedly poor growth figures in the first quarter of 2015 and turmoil on the stock and bond markets. However, only a small number of survey participants actually expect a deterioration of the economic situation.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Gains despite Poor British Data
Although British data is likely to cause the Pound to soften versus the majority of its most traded currency rivals, the Pound is likely to hold gains against the Euro for the remainder of the European session. This is due to the geopolitical tensions in Greece. With that being said, however, there is the potential for the Pound Sterling to Euro (GBP/EUR) exchange rate to dive should European economic data produce positive results.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3980 today.