The Pound Sterling to Euro (GBP/EUR) exchange rate fell from a high of 1.3980 to trend in the region of 1.3845 on Tuesday as the UK’s Consumer Price Index showed an unexpected annual decline in April.
UK Inflation Prints Negatively for the First Time in over 50 Years, Pound Sterling to Euro (GBP/EUR) Exchange Rate Falls
Prior to the release of the UK’s Consumer Price Index, the Pound Sterling to Euro (GBP/EUR) exchange rate surged even as reports of a Greek deal being reached within a week surfaced.
On Monday Greek Finance Minister Yanis Varoufakis expressed confidence that Greece will reach an accord with its creditors in around a week.
However, unconfirmed rumours of a proposal being offered by the European Commission (EC) and bets that the negotiations will continue to drag on without resolution weighed on the common currency.
Today the Pound Sterling to Euro (GBP/EUR) exchange rate hit a high of 1.3980
As stated by Derek Gatopoulos and Nicholas Paphitis; ‘For almost four months, Greece’s radical left-led government has been haggling with its creditors from the 19-country Eurozone and International Monetary Fund over economic reforms it must make to secure a 7.2 billion euro ($8 billion) cash injection. That is the final payment due from the country’s 240 billion-euro bailout program, launched five years ago after Greece’s public finances spiralled out of control and it was locked out of international bond markets.’
However, the Euro did claw back declines against the Pound after the UK’s Consumer Price Index entered disinflation for the first time in 60 years.
As a steady annual reading of 0.0% had been expected, the -0.1% year-on-year decline took a toll on the Pound.
The UK’s core inflation measure also drifted from 1.0% to 0.8% despite predictions for no change.
ZEW Economic Sentiment Surveys, Eurozone CPI Inspire GBP/EUR Exchange Rate Movement
While the Pound did fall against a number of its rivals after the UK’s inflation data was published, declines against the Euro were a little restrained as the Eurozone published its own less-than-impressive data.
Eurozone inflation may have held at 0.0% on the year in April, as anticipated, but the latest confidence gauges from the ZEW Centre for Economic Research revealed a far worse fall in sentiment in the Eurozone and its largest economy than investors had been prepared for.
Both the Eurozone and German Economic Sentiment Indexes dropped, as did the German Current Situation Survey.
Economist Aline Schuiling observed; ‘The decline is probably related to worries about Greece and the rise in bond yields over the past few weeks. Domestic economic fundamentals are strong, employment is growing, real wage growth has jumped higher and corporate profitability has improved as well.’
Today the Pound Sterling to Euro (GBP/EUR) exchange rate fell to a low of 1.3823
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Recover Losses if BoE Minutes Show Split Vote on Interest Rates
While the Pound Sterling to Euro (GBP/EUR) exchange rate may continue to struggle for the rest of the European session, the pairing could recoup losses on Wednesday depending on the content of the minutes from the latest Bank of England (BoE) policy meeting.
Signs of division among the nine-member Monetary Policy Committee (MPC) would be Pound-supportive, and if any of the policymakers voted in favour of hiking borrowing costs immediately the GBP/EUR exchange rate could even return to the 1.40 level.
The Eurozone will also be publishing Construction Output figures while Germany releases its Producer Price Index.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3840, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.5521, the US Dollar to Pound Sterling (USD/GBP) exchange rate was trading in the region of 0.6443 and the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7223
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