GBP/EUR Exchange Rate Muted on Weak UK CPI Figures
The Pound to Euro (GBP/EUR) exchange rate is subdued this morning as markets react to some weaker-than-expected inflation figures from the UK.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1279, virtually unchanged from this morning’s opening rate.
Pound (GBP) Stumbles as UK Inflation Falls Short
The Pound (GBP) has been placed on the defensive this morning after the UK’s consumer price index (CPI) came in below expectations in August.
According to data published by the Office for National Statistics (ONS), domestic inflation slumped from 2.1% to 1.7% last month, sinking below expectations of a more modest slide to 1.9%.
UK inflation falls to lowest since December 2016, down from 2.1% to 1.7%, with PMI suggesting consumer price index has further to fall in coming months #GBP #BOE pic.twitter.com/KZ45LD5HGk
— Chris Williamson (@WilliamsonChris) September 18, 2019
This left inflation at its lowest levels since December 2016 and may put more pressure on the Bank of England (BoE) to cut interest rates after Brexit.
Also putting pressure on GBP exchange rates this morning were warnings from the EU that there is still a serious risk of a no-deal Brexit.
Speaking in the European Parliament, European Commission President Jean-Claude Juncker said there is a ‘palpable’ risk that the UK could leave the EU without a deal in place.
The EU’s Chief Brexit negotiator Michel Barnier also chimed in to warn that the consequences of a no-deal Brexit cannot be underestimated.
Euro (EUR) Mixed on Gloomy Final CPI Reading
Meanwhile, the Euro (EUR) also suffered a setback this morning as the Eurozone’s own inflation figures failed to make a splash with EUR investors.
Today’s headline CPI figures printed in line with a preliminary release, confirming inflation held at a two-year low in August.
Stubbornly low inflation in the Eurozone has proven to be a major headache for the European Central Bank (ECB) this year, likely contributing to the bank’s decision to unveil fresh stimulus measures earlier this month.
GBP/EUR Exchange Rate Forecast: BoE
Still on the docket for this week’s session is the publication of the UK’s retail sales figures as well as the Bank of England’s latest policy decision.
First up will be the release of the retail sales figures. This could see the Pound to Euro (GBP/EUR) exchange rate give some ground tomorrow morning as economists forecast sales growth will have stalled in August.
However the main focus for GBP investors on Thursday is likely to be the BoE, as it concludes its September policy meeting.
No policy changes are expected from the bank this month as members of the BoE’s Monetary Policy Committee (MPC) await more clarity on Brexit.
But we could still see Sterling sentiment influenced by the bank’s forward guidance and its latest take on Brexit.
Meanwhile, for EUR investors the spotlight will be on the Eurozone’s latest consumer confidence release at the end of the week, with a further deterioration in household expectations likely to drag on the single currency.