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Pound Sterling to Euro Exchange Rate Hits Fresh Post-January Worst on Signs of Stronger Eurozone Inflation

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Pound to Euro Exchange Rate Slides Lower amid Lack of Sterling Support

As the Pound (GBP) has failed to find any significant support over the past week, the Pound Sterling to Euro (GBP/EUR) exchange rate has slipped lower. Investors are hesitant to become too optimistic on the Euro (EUR) outlook ahead of today’s Eurozone inflation report though.

Since opening this week at the level of 1.1200, GBP/EUR has trended with a downside bias.

The pair briefly held its ground at the beginning of the week, but this morning was trending near a low of 1.1131. This was the worst GBP/EUR level since early January.

Investors have been hesitant to make big movements on the Pound to Euro exchange rate this week, as political uncertainty clouds over the Pound outlook while the Euro outlook is weighed by European Central Bank (ECB) speculation.

Pound (GBP) Exchange Rates Slip Ahead of UK Growth Report

For most of the week, Pound movement has been mixed and limited as Brexit fears dominate political and economic uncertainties.

Conservative Party leadership contest frontrunner Boris Johnson has claimed that the chances of a no-deal Brexit are low, but his intention to aim for a no-deal Brexit instead of delaying the process again has concerned investors.

No-deal Brexit fears have kept broad pressure on the Pound, so traders have had little reason to buy the British currency ahead of today’s UK growth rate report.

In the end, Britain’s final Q1 Gross Domestic Product (GDP) growth rate report simply met projections, coming in at 0.5% quarter-on-quarter and 1.8% year-on-year as expected.

The growth data had little impact on Sterling, but the British currency was a little weaker as UK business investment came in slightly worse than expected in its final Q1 report.

Euro (EUR) Exchange Rates Buoyed by Signs of Resilience in Eurozone Inflation

European Central Bank (ECB) President Mario Draghi said last week that if the Eurozone’s price pressures did not improve, the bank would likely need to ease monetary policy.

As a result, investors have been focused on inflation projections from across the Eurozone this week.

While Spain’s latest inflation projection fell short of expectations, yesterday’s German inflation and today’s French figures beat market expectations.

German inflation is projected to have risen to 1.6% year-on-year in June, while France’s yearly figure is projected to have climbed from 0.9% to 1.2%. France’s monthly figure came in at 0.2% rather than the expected stagnant 0.0%.

French household consumption was also twice as strong as expected according to this morning’s May figures.

These stats helped the Euro to edge higher and hold its ground, as speculation rose that the ECB may not need to remain dovish if Eurozone inflation continues to show signs of improvement.

Pound to Euro (GBP/EUR) Exchange Rate Investors Awaiting PMIs

This week’s data has given Euro investors a better idea of how the Eurozone’s price pressures fared this month, and in the coming week investors will get more solid data on economic activity.

Fresh signs of strength in the Eurozone’s economic activity could further douse European Central Bank (ECB) easing speculation and boost the Euro outlook.

As a result, Pound to Euro exchange rate investors will be focused on more slews of influential Eurozone data in the coming week, starting with manufacturing PMIs and unemployment rate figures on Monday.

German retail sales will follow on Tuesday, with services and composite PMI stats on Wednesday and the Eurozone’s overall retail sales stats on Thursday.

These figures, especially German manufacturing on Monday and the overall Eurozone stats, could be highly influential to the Euro outlook if they surprise investors.

The most notable UK ecostats throughout the week will be Britain’s own June PMIs from Markit, but Pound investors are more likely to react to potential developments in UK politics.

Pound to Euro (GBP/EUR) exchange rate investors may also react to any surprising shifts in global trade tensions following the weekend’s G20 Summit in Osaka.