Pound Sterling Euro Exchange Rate News: GBP/EUR Steady as UK Inflation Hits Two-Year Low and Eurozone Industrial Production Slumps

GBP/EUR Exchange Rate Muted Following UK Inflation Figures

The Pound Sterling to Euro (GBP/EUR) exchange rate is trading in a narrow range this morning as markets react to the UK’s latest consumer price index figures.

At the time of writing the GBP/EUR exchange rate is largely unchanged from this morning’s opening rate, leaving the pairing close to yesterday’s low.

Pound Sterling (GBP) Stable as Inflation Slumps

The Pound (GBP) is rangebound against the Euro (EUR) and the majority of its other peers this morning after a larger-than-expected drop in UK inflation.

According to data published by the Office for National Statistics (ONS), domestic inflation fell from 2.1% to 1.8% in January.

This was weaker than the 1.9% forecast by economists and means inflation has slowed to a two-year low.

The ONS attributed the fall in inflation to a drop in energy prices at the start of 2019, which offset a modest rise in food, alcohol and transport costs over the same period.

The slowdown paints a mixed picture of the UK economy as while it should give a boost to consumer spending power, it could also be taken as a sign that economic activity is slowing.

Furthermore this is the first time that inflation has fallen below the Bank of England’s (BoE) 2% target since 2017, something that may further dampen any appetite within the bank to raise interest rates this year.

Euro (EUR) Exchange Rates Struggle as Eurozone Industrial Production Slumps

At the same time, the appeal of the Euro (EUR) was dented this morning by the release of the Eurozone’s latest industrial production figures.

The data revealed that production continued to contract at an alarming rate in December, with output sliding 0.9% from November and down a whopping 4.2% year-on-year.

This indicated that industrial production in the bloc is falling at its fastest pace since the financial crisis, leaving the Euro on the defensive this morning.

GBP/EUR Exchange Rate Forecast: German GDP in Focus – is a Recession on the Horizon?

Looking ahead to the latter half of this week’s session, movement in the Pound Euro (GBP/EUR) exchange rate is likely to be focused around the release of Germany’s latest GDP figures.

There has been considerable speculation in recent weeks over the possibility that Germany may have fallen into a recession at the end of 2018 after a run of gloomy industrial data.

Understandably Thursday’s data could therefore prompt some major swings in the Euro depending on whether or not the Eurozone’s largest economy managed to avoid another contraction in growth in the fourth quarter.

Meanwhile, outside of any notable Brexit developments, any movement in the Pound is likely to be driven by the release of the UK’s latest retail sales figures on Friday.

This may provide some modest support for Sterling if sales growth rebounded in January as forecast.

Matthew Andrews

Contact Matthew Andrews