Euro Pound (EUR/GBP) Exchange Rate Flattens amid Cooling Inflation Expectations
The Euro Pound (EUR/GBP) exchange rate is trading flatly today, as cooling inflation expectations in the bloc dent EUR.
At the time of writing, EUR/GBP is trading at around £0.8608, showing little movement from today’s opening rates.
Euro (EUR) Struggles amid Cooling Inflation Expectations
The Euro (EUR) is struggling for support today, as a mixed set of economic data releases weighs on the single currency.
Earlier today, the European Central Bank (ECB) published the results of their latest consumer expectations survey. This found that households expected inflation to continue to fall, with the median rate over the next 12 months falling to 4.1%.
With inflation already appearing to be cooling in the bloc, this morning’s data may be undermining bets on additional tightening.
Furthermore, German factor orders were seen to have fallen by 0.4%, printing far below forecasts of a 3% expansion. This may be further weighing on EUR.
Analysts at Pantheon Macroeconomics commented:
‘Overall, the poor performance at the start of Q2 leaves German factory orders down just under 10% compared to the level in the first two months of the year, and on track for a significant fall in Q2 as a whole.’
Pound (GBP) Undermined amid Post Rally Reprice
The Pound (GBP) is being undermined today, as investors aim to reprice Sterling following last week’s significant gains.
Because of this, GBP seems unable to gain much ground against its peers. Furthermore, today’s release of the British Retail Consortium’s (BRC) retail sales monitor may be weighing on Sterling.
The release printed at 3.7% for May, falling from 5.2% on a yearly basis and far below forecasts of a hold. As such, the UK’s retail sector may be prompting concerns over inflation’s impact on UK consumers.
Helen Dickinson OBE, the Chief Executive of the BRC, commented:
‘With consumer confidence still recovering from record depths, and continued tightening of household incomes, we are unlikely to see substantial sales growth in the coming months. But, with signs that inflation has possibly peaked, retailers are hopeful that confidence will continue to improve.’
Elsewhere, a risk-off market mood may be weighing on the Pound, due to its increasingly risk-sensitive nature.
EUR/GBP Forecast: German Industrial Production Recovery to Buoy EUR?
Looking ahead for the Euro, tomorrow brings the publication of the latest German industrial production data.
As the bloc’s largest economy, the forecast of a 0.6% improvement on a monthly basis could bring cheer to EUR investors.
A litany of European Central Bank policymakers are scheduled to speak tomorrow too. The common currency could gather strength if they maintain the ECB’s hawkish narrative.
Meanwhile, the Pound may be restricted by a lack of short term macroeconomic data releases. Because of this, market dynamics may continue to sway Sterling.
As an increasingly risk-sensitive currency, a sour market mood could see EUR/GBP strengthen as sentiment wanes toward GBP.
