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Pound Sterling to Euro (GBP/EUR) Forecast: Exchange Rate Slides by 0.50%, Germany Enters Deflation

The Pound Sterling to Euro (GBP/EUR) exchange rate softened by more than 0.50% Monday afternoon despite data showing that Germany slid into deflation territory in January. 

According to the German Federal Statistics office, consumer prices in Europe’s largest economy, measured according to common European standards, fell 1.3% in January on the month and were 0.5% lower on the year,

Earlier the Pound Sterling to Euro (GBP/EUR) exchange rate fell on Thursday after data released by the Confederation of British Industry showed that UK retail sale growth fell in January, albeit at a slower pace than forecast.

Earlier the Pound Sterling to Euro (GBP/EUR) exchange rate was holding steady to trade in the region of 1.338 even as economic data out of the Eurozone and Germany came in positively.

Earlier in the session, data out of the Eurozone’s largest economy showed that Germany’s unemployment rate fell to a record low of 6.5% in January according to the nation’s Labour Office. The figure marks the lowest jobless rate for the nation since Germany was reunified in 1990. December’s unemployment figure was revised upward to 6.6%.

The number of people out of work decreased by 8,000 on a seasonally adjusted basis to 2.836 million, the data showed.

The report highlights the economic disparity in the Eurozone as Germany’s unemployment rate is now a quarter of Greece’s which stands close to 25%.

A separate report released by the European Commission showed that economic sentiment across the 19 member Eurozone increased slightly by 0.6 points to 101.2. The report suggests that sentiment improved as a result in increased consumer and retail trade confidence. Sentiment rose the most in Germany (+0.3), Spain and Italy. The biggest declines were recorded in France and the Netherlands.

Taking the shine off those improved figures however, was data published by the European Central Bank (ECB), which showed that lending to households and firms across the Eurozone fell by 0.5% in December. It is hoped that the announcement of the ECB’s quantitative easing programme will lead to an increase in lending over the coming months.

Greece/Troika Standoff In Focus

The Euro would normally edge higher following the release of positive data but today investors are wary over the expected standoff between the New Greek government and its Troika of lenders. Reports suggest that the Syriza led government will try to convince the EU, ECB and IMF to freeze the nation’s bond repayments until the economy is growing strongly.

Market attention is now focused on a meeting between EU officials and Athens due to take place later in the session, traders will be keen to see whether either side will be willing to back down on their stances.

The talks are expected to be rocky however, as the New Greek government diverged from the European Union’s stance towards Russia.

‘I’ve noticed with dismay that Greece today has abandoned the joint position of the European Union on Russia. You just cannot, on the one hand, demand from Europe to show solidarity with your own country like Mr.Tspiras does and then, as a first official step, split the joint European position,’ said Germany’s Martin Schulz.

Euro Exchange Rate News:

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.1300 ,
Euro,,British Pound,0.7461 ,
Euro,,Australian Dollar,1.4484 ,
Euro,,Canadian Dollar,1.4166 ,

As of 11:00 am GMT