Euro (EUR) Strengthened by Positive CPI Figures
Eurozone core consumer prices rose by more-than-expected, increasing 1% instead of the 0.9% forecast. Accompanying data has been rather mixed for the Euro, but it has nonetheless allowed the Euro to trend up against Pound Sterling, despite a positive result from the GfK Consumer Confidence survey. French and Spanish GDP both performed well, further aiding the common currency’s upward progress.
American Multinationals Invest in UK ‘Stay’ EU Campaign
In a blow for ‘Brexit’ supporters Morgan Stanley, Goldman Sachs, America World Bank and JPMorgan have all invested money into the ‘stay’ campaign, throwing their support behind the UK’s membership of the EU. Morgan Stanley and JPMorgan are both understood to have donated six-figure sums to the campaign.
Despite showing a small slowdown in growth, the latest UK GDP figures have sent Pound Sterling (GBP) into a bullish uptrend. The Euro is soft on a drop in confidence among businesses, with trader anticipation ahead of key German CPI figures later also pushing the common currency down.
Pound Sterling to Euro (GBP/EUR) Exchange Rate: Strong Advance as UK Economy Fears Soften
As expected, UK GDP figures have printed at 1.9%, a -0.2% drop on the previous year-on-year (YoY) four-quarter average figure. Economic growth in the final quarter of 2015 did improve, rising to 0.5% from the previous 0.4%, marking three years of uninterrupted expansion. The rise in quarterly GDP growth is only slightly below what would be expected from an economy enjoying the benefits of full employment, with unemployment at a 10-year low, a fact which will soften fears of weakness.
Of slight concern among the figures will be the fact that the UK services sector accounted for almost all growth in the last quarter, growing 0.7% compared to a -0.2% drop in industrial production, a -0.1% fall in construction output and little change in manufacturing. Utilities and mining output also dropped.
In light of the day’s data, the question of concern to investors and economists is likely to change from whether or not the economy will grow to how to redress the imbalance between GDP contributions among the different sectors.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading around 1.3142.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Soft: German Inflation Data on Tap
Euro demand has cooled ahead of the German CPI figures due out later during the European session. As a result the common currency is trending down -0.7 against Pound Sterling and the New Zealand Dollar (NZD), -0.9% against the South African Rand (ZAR) and -1% against the Australian Dollar (AUD).
The Euro has been weakened by a drop in business confidence. A report by the European Commission (EC) showed that Economic Confidence fell from 106.7 to 105.0, while the Business Climate Indicator fell from 0.41 to 0.29. Industrial Confidence fell deeper into negative territory, dropping to -3.2, while Services Confidence slipped from 13.1 to 11.6. The forecast for consumer confidence remained steady at -6.3.
Spain saw the biggest drop in confidence, with Germany coming second and Italy third. Surprisingly, sentiment in France increased, despite the impact of recent events. Businesses in Holland were also feeling more optimistic.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trading between 0.7598 and 0.7663.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: German CPI on Tap
The German Consumer Price Index figures are due out later today. The CPI is expected to show a -0.8% drop in prices, although at an EU harmonised rate the drop will be -1.0%. Year-on-Year (YoY) prices are expected to grow by 0.4% in both the harmonised and non-harmonised indexes.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading between 1.3040 and 1.3158.