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Euro Pound Sterling (EUR/GBP) Exchange Rate Edges Up as UK Inflation Comes in Below BoE 2% Target

Euro Currency Forecast

Euro Pound (EUR/GBP) Exchange Rate Increases as UK House Prices Rise at Weakest Annual Pace in Five-and-a-Half Years

This morning, the Euro Pound (EUR/GBP) exchange rate rose, and the pairing is currently trading at an inter-bank rate of £0.8574.

The UK Retail Price Index (RPI) rose by 0.7% as forecast in February, and by an annual rate of 2.5%.

Data also showed that the UK Consumer Price Index (CPI) rose by a higher-than-expected 1.9% in the 12 months leading up to February.

However, this hovered close to January’s two-year low, while official data showed that house prices rose at the weakest annual pace for five-and-a-half years.

This was also below the Bank of England’s (BoE) 2% inflation target, which likely dampened sentiment in Sterling.

Meanwhile, core inflation edged down, which weighed on the UK currency as this left domestic price pressures muted ahead of Brexit.

Euro (EUR) Rises despite Disappointing German PPI Figures

The Euro rose against the Pound this morning despite some disappointing data showing that the German Producer Price Index (PPI) slipped further than forecast.

February’s PPI slipped to -0.1% from the previous month’s growth of 0.4% which offset December’s contraction.

The annual PPI rose by 2.6% in February, remaining consistent with growth in January 2019.

Sterling (GBP) Slips Ahead of PM’s Article 50 Extension Request

UK Prime Minister Theresa May is widely expected to request an extension to Article 50 from the European Union today.

Reports suggest that the Prime Minister will not be asking for a long extension, although an anonymous Cabinet Minister has said this was a ‘wrong choice’ and a ‘craven surrender to hardliners’.

A statement from Number 10 indicated that May would not be asking for a long extension when she writes to the EU, saying:

‘There is a case for giving Parliament a bit more time to agree a way forward, but the people of this country have been waiting nearly three years now.

‘They are fed up with Parliament’s failure to take a decision and the PM shares their frustration.’

Euro Pound Outlook: Will the EUR/GBP Exchange Rate Fall on a Hawkish BoE?

Looking ahead to Thursday, the Pound (GBP) could slide against the Euro (EUR) following the release of February’s retail sales figure.

If sales contract by -0.4% or more between January and February as forecast, it could weigh on Sterling.

In the afternoon the Bank of England (BoE) is due to release its interest rate decision followed by meeting minutes.

If the BoE hold interest rates as expected, but the minutes imply that the tone of the central bank is hawkish and a rate hike could be in sight for 2019, the Euro Pound (EUR/GBP) exchange rate could slide.