Pound Euro (GBP/EUR) Exchange Rate Rises on Weak Eurozone Consumer Prices
The Pound (GBP) rose against the Euro (EUR) as Eurozone consumer prices rose at a slower pace, leaving the pairing trading at around €1.1503.
The single currency remained under pressure on Tuesday after data revealed the Eurozone’s Consumer Price Index (CPI) grew at a slower pace in February.
This morning’s data showed that the global spread of coronavirus depressed oil prices, sending energy prices -0.3% lower.
However, data did show that core inflation edged up slightly from 1.1% to 1.2%, which did little to support the Euro.
Looking at underlying price pressure, data shows that businesses remain cautious due to the uncertain economic atmosphere.
The Euro fell from a five-week high after the European Central Bank (ECB) stated it was ready to take ‘targeted’ steps to fight the effects of Covid-19.
Looking ahead, the single currency could suffer further losses following the release of Italy’s final Q4 GDP growth data.
If quarter-on-quarter growth slumps further than expected in the final three months of 2019, the euro will suffer losses.
Pound (GBP) Jumps as Government Unleashes ‘Battle Plan’
Meanwhile, Sterling was able to make gains today as the UK government released its ‘battle plan’ to help tackle the spread of coronavirus.
With Britain already recording 39 confirmed cases of the virus, Prime Minister Boris Johnson said that a ‘very significant expansion’ was possible.
On Tuesday, Mr Johnson said:
‘It is highly likely coronavirus will spread more widely in the coming days and weeks, which is why we’re making every possible preparation.’
The pound also made gains after outgoing Bank of England (BoE) Governor, Mark Carney said he expected a ‘powerful and timely’ global response to the virus outbreak.
Added to this, G7 finance officials are scheduled to discuss ways to bolster their economies against the impact of coronavirus.
However, an official noted that they are not expected to call for new spending or coordinated interest rate cuts.
Commenting on this, senior investment strategist at OCBC Bank Wealth Management, Vasu Menon said:
‘This is a tug of war between hope and fear. Central banks are giving hopes with their potential stimulus.
‘The question is what they will do? Monetary policy is already very loose and interest rates are very low.’