GBP/EUR Exchange Rate Bounce Tempered by CPI Figures
The Pound to Euro (GBP/EUR) exchange rate has bounced back from a two-week low this morning, despite underwhelming UK inflation limiting the appeal of Sterling.
At the time of writing the GBP/EUR exchange rate is trading at around €1,1386, up roughly 0.4% from this morning’s opening levels and rallying from a two-week low struck yesterday.
Upside in the Pound (GBP) Capped by Weak Inflation Figures
The Pound (GBP) is making some tentative gains against the Euro (Euro) this morning as markets digest the UK’s latest consumer price index (CPI).
According to data published by the office for National Statistics (ONS), UK inflation slowed from 1.7% to 1.5% in March its lowest levels since December.
This slump in inflation was largely attributed to falls in clothing and fuel prices as the coronavirus lockdown severely hit demand.
While last month drop is unlikely to fill GBP investors with much confidence, analysts warning the coming months could be much worse.
Richard Pearson, Director at Investment Platform, EQi, comments:
‘Inflation is key indicator for future economic growth and this morning’s figures, covering March, start to paint a picture of potential damage to come for the UK. But the worst is likely yet to come in next month’s numbers.’
GBP investors will get a clear picture of how the UK economy is faring this month with the publication of April’s preliminary PMI figures tomorrow, with economists predicting economic activity will have slumped to a new all-time low.
Euro (EUR) In Holding Position as All Eyes on Thursday’s EU Summit
At the same time, the Euro (EUR) is trading in a narrow range today as EUR investors brace for the EU’s virtual summit of leaders on Thursday.
Tomorrow’s meeting comes as relations in the EU have frayed, with rising tensions between members over the handling of the coronavirus crisis.
EU leaders have so far failed to agree upon a coordinated fiscal response to the crisis with Germany and particularly the Netherlands resistant to calls for the creation of a joint debt program.
Should EU leaders continue to squabble over its response to the coronavirus crisis, we are likely to see the Euro exposed to losses through the second half of this week as it reignites concerns about the unity and future of the EU.