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Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Eurozone Deflation Arrives, Pound Gains

Euro Currency Forecast

Pound Sterling to Euro (GBP/EUR) Exchange Rate Hits a High of 1.2794

The Pound Sterling to Euro (GBP/EUR) exchange rate posted a  modest gain on Wednesday following the publication of the Eurozone’s Consumer Price Index.

Non-core CPI printed at -0.2% on the year, less than the -0.1% figure expected.

However, Euro declines were limited as the Eurozone’s core CPI printed at 0.8% rather than the 0.7% projected.

The data saw economist Holger Schmieding comment; ‘Hello deflation. Even if we do not share the widespread concerns about dangerous deflationary dynamics [the ECB is] miles away [from it’s 2% inflation target].’

The Eurozone’s unemployment rate held at 11.5% in November, as forecast by economists.

As investors digested the data the Euro fell by 0.15% against the Pound and 0.2% against the US Dollar.

Earlier…

The Pound Sterling to Euro (GBP/EUR) exchange rate posted a modest decline on Tuesday as a 19-month low Services PMI reading for the UK dragged the British currency lower.

GBP/EUR Exchange Rate Steady before CPI

Although various factors are piling pressure on the Euro at the moment, the common currency was able to eke out a 0.2% daily gain against the Pound thanks to a poor UK services report pushing Bank of England (BoE) rate hike forecasts even further into the future.

The Euro to Pound Sterling (EUR/GBP) exchange rate achieved a high of 0.7852

The Pound Sterling to Euro (GBP/EUR) exchange rate was holding steady as Wednesday’s European session began and investors focused on the upcoming Eurozone inflation report.

The Pound derived some very modest support from the British Retail Consortium’s (BRC) Shop Price Index.

The measure had been expected to print at -1.8% on the year in December following November’s -1.9% reading. However, it actually came in at -1.7%.

The GBP/EUR exchange rate was also trending in a narrow range as German retail sales were shown to have increased by more-than-expected on the month in November but to have fallen unexpectedly on the year.

Sales jumped by 1.0% on the month instead of climbing the 0.2% expected but were down -0.8% on the year. An annual increase of 0.6% had been anticipated.

The Pound Sterling to Euro (GBP/EUR) exchange rate brushed a low of 1.2732

As the European session progressed Markit’s German Construction PMI for December came in at 50.5, down from 53.5 and nearing the 50 mark separating growth from contraction.

Germany’s employment figures also surprised expectations by showing that the number of jobless persons fell by -27,000 in December, a much sharper drop than the -5,000 loss anticipated.

The strong figure took the German unemployment rate from 6.6% to 6.5% in December.

After the data was published the Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.2746.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast

The Pound Sterling to Euro (GBP/EUR) exchange rate could experience notable movement in the hours ahead as the Eurozone publishes one of its most influential ecostats – Consumer Price Inflation.

As Germany’s inflation figure printed below expected levels earlier in the week, the number for the currency bloc as a whole could well deliver a negative surprise.

As it is, the non-core CPI index is believed to have come in at -0.1% year-on-year in December – down from an annual figure of 0.3% in November.

If the result meets or comes in below the forecast it will further up the odds of the European Central Bank (ECB) rolling out extensive stimulus measures when it gathers on the 22nd.

Consequently, the Euro could soften across the board after the data’s release and the Pound Sterling to Euro (GBP/EUR) exchange rate could recover ground.

Investors will also be focusing on the Eurozone’s Unemployment rate, which is believed to have held at 11.5% in November.

The Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7842

The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.2746

The US Dollar to Euro (USD/EUR) exchange rate was trending in the region of 0.8423

The Euro to US Dollar (EUR/USD) exchange rate was trending in the region of 1.1868