The Euro strengthened close to a one-week high against the Pound due to the release of worse than forecast inflation and retail price data.
Sterling has softened for a third consecutive day against the Euro as investors were left disappointed by weaker-than-expected inflation data ahead of the release of the Bank of England’s newest economic forecasts.
Data released by the Office for National Statistics showed that inflation in the UK dropped to its lowest rate for more than a year in October. Consumer Price inflation fell to an annual rate of 2.2%, down from the 2.7% recorded in September. The decline mirrors the big declines recorded in the Eurozone and surprised Economists who had been expecting UK inflation to fall to 2.5%.
“Falling petrol and diesel prices seem to have done the most to drag the inflation rate down, and the ongoing softness in Brent crude prices means there may be a little more of this to come in the months ahead” said Rob Carnell an economist at ING.
The BoE is due to publish its new economic forecasts on Wednesday. Tuesday’s data is likely to strengthen economists’ expectations that the Central Bank will choose to revise down its short-run forecasts for inflation, as well as raising its growth forecast and bringing forward the date at which it expects unemployment to hit 7%.
Earlier in the session Germany released data which showed that inflation in the Eurozone’s largest economy fell to a three-year low. The inflation rate fell to 1.2%, well below the 2% target set out by the European Central Bank. Concerns are growing that the region may face deflation if prices don’t rise.
Deflation, which is marked by stagnant or falling prices, is bad for any economy. It causes consumers to withhold spending on the prospect of lower prices, thus reducing demand and the incentive for businesses to invest in jobs and production. To counter this, the ECB cut interest rates to a new record low of 0.25%.
Euro (EUR) Exchange Rates
As of 11:00 am GMT
The Euro/US Dollar Exchange Rate is currently in the region of: 1.3386
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8434
The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.4362
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6287
The Euro/ Canadian Dollar Exchange Rate is currently in the region of: 1.4043
The Euro/ Japanese Yen Rate Exchange Rate is currently in the region of: 133.5079
The Euro/Swiss Franc Exchange Rate is currently in the region of: 1.2325
The Pound Sterling/ Euro Exchange Rate is currently in the region of: 1.1855
The US Dollar/Euro Exchange Rate is currently in the region of: 0.7470
The Australian Dollar/Euro Exchange Rate is currently in the region of: 0.6961
The New Zealand Dollar/Euro Exchange Rate is currently in the region of: 0.6139
The Canadian Dollar/Euro Exchange Rate is currently in the region of: 0.7120
Swiss Franc/Euro Exchange Rate is currently in the region of: 0.8113