The Euro to Pound exchange rate softened on Wednesday after the Pound received support from positive construction and house price data, the single currency meanwhile was weakened by disappointing PPI and GDP data.
Concerns over weak inflation and the possible risks posed by deflation were increased after a report showed that producer price inflation in the Eurozone fell more than expected in February.
According to Eurostat’s Producer Price Index, inflation eased by a seasonally adjusted figure of 0.2% in February. Economists had been forecasting for a fall of 0.1%, in January producer prices softened by 0.3%.
On a yearly basis the PPI fell at an annualised rate of 1.7% in February, more than the 1.6% expected by economists. The data has raised speculation that the European Central Bank could introduce stimulus measures at Thursday’s policy meeting.
The largest decreases were observed in Cyprus (-5.4%), Lithuania (-4.6%), Belgium (-4.2%), Slovakia (-3.8%) and Greece (-3.5%), and the only increases in Ireland (+1.1%), Latvia (+0.5%) and Malta (+0.3%).
Also weighing upon the Euro was the release of data which showed that the region’s GDP came in below expectations. In the fourth quarter of 2013 the regions GDP expanded by 0.2%, below expectations for a figure of 0.3%. On a yearly basis GDP expanded by 0.5%, matching forecasts.
The Pound meanwhile made gains following the release of data which showed that UK house prices increased for a 15th consecutive month in March.
A separate report showed that the UK’s construction sector continues to perform strongly. According to Markit’s Construction PMI, activity softened slightly to 62.5 in March but remains close to the previous month’s strong figure of 62.6.
“A growth next month will see twelve consecutive months of growth for the first time since the global financial crisis. Once again it was the housing market that drove demand onwards; something that is not at all surprising given this morning’s nationwide house price index showing the average rising by 9.5% year-on-year,” said Jeremy Cook from World First.
The Euro is expected to make further movements on Thursday as investors eagerly await the outcome of the ECB’s policy meeting and the publication of retail sales data. If the ECB does hint at introducing stimulus measures the currency will experience volatility.
Current Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3786 ,
Euro,,British Pound,0.8284 ,
Euro,,Australian Dollar,1.4918 ,
Euro,,Canadian Dollar,1.5192 ,
British Pound,,Euro,1.2075 ,
[/table]
