Pound Euro (GBP/EUR) exchange rate flat amid easing UK inflationary pressures
The Pound Euro (GBP/EUR) exchange rate is trading in narrow boundaries this morning, amid cooling UK inflationary pressures.
At the time of writing, GBP/EUR is trading at around €1.1692, showing minimal movement from today’s opening levels.
Pound (GBP) wavers amid falling food and shop inflation
The Pound (GBP) is under pressure this morning, following cooler-than-expected food inflation data for February.
The British Retail Consortium (BRC) reported that shop price annual inflation eased to 2.5% on a monthly basis. Decelerating from January’s figure of 2.9%, this suggests easing pressure on consumers and a lightening cost of living.
Helen Dickinson, Chief Executive of the BRC, commented:
‘Food prices fell month-on-month with drops in fresh food including meat, fish and fruit. This was driven by easing input costs for energy and fertiliser while retailers competed fiercely to keep prices down.
In non-food, inflation for furniture, electricals, and health & beauty products rose, but the price of clothing continued to fall as many retailers kept promotions in place to entice consumer spend.’
Additionally, Kantar found that supermarket price inflation had slowed to 5.3%, the lowest level since March 2022.
Dwindling food inflation is likely hampering Sterling today as the Bank of England (BoE) is keeping a close eye on the measures. With price increases decelerating, the BoE may be able to cut interest rates sooner than expected, dampening GBP.
Euro (EUR) undermined by continued German economic jitters
German economic anxieties are capping the Euro (EUR) this morning, as investors analyse the latest GfK consumer sentiment index.
March’s reading stabilised at -29, up from a revised -26 reading for February. This demonstrates that confidence remains low for the Eurozone’s largest economy, as willingness to spend remains low amongst consumers.
Rolf Buerkl, Consumer Expert at the NIM, commented:
‘There is great uncertainty among consumers. In addition to the constantly rising prices, the weaker economic forecasts for the German economy this year are likely to be another important reason for this. For the time being, Germany must continue to wait for an economic recovery.’
However, the common currency is likely being underpinned by hawkish comments from European Central Bank (ECB) President Christine Lagarde.
Yesterday, President Lagarde indicated that interest rates may remain higher than markets anticipate as the ECB aims to curtail inflation.
Pound Euro exchange rate forecast: BoE Mann’s speech in focus
Looking ahead for the Pound, BoE policymaker Catherine Mann is due to deliver a speech Wednesday afternoon.
As one of the more hawkish members of the Monetary Policy Committee, she is likely to advocate for tighter monetary policy.
If she successfully advocates for keeping interest rates unchanged for longer, the Pound could strengthen against its peers. However, if markets remain convinced of rate cuts coming sooner than later, GBP may struggle.
The core catalyst of movement for the Euro, meanwhile, is likely to be a slate of German data releases on Thursday.
Retail sales in January are forecast to have improved on a monthly basis, while unemployment is expected to have held steady. This could lift the Euro by indicating improving economic conditions in the Eurozone’s largest economy.
However, this may be offset by cooling inflation. Germany’s headline consumer price index is forecast to have decelerated to 2.6% in February, which may weigh on the common currency.