The Euro to Pound Sterling (EUR/GBP) exchange rate edged lower on Wednesday following the release of mixed German data and separate reports relating to Greece and Russia.
The pairing held its decline during the European session and could extend losses on Wednesday if the German unemployment and inflation figures disappoint.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Dips as German Import Prices Decline
The Euro to Pound Sterling (EUR/GBP) exchange rate spent much of Tuesday trending in a stronger position despite a lack of influential economic reports for the Eurozone.
The common currency gained against its British peer amid bets its recent decline had been excessive. Growing speculation that Greece will be able to renegotiate the terms of its bailout without the nation having to leave the currency bloc also supported the Euro.
Demand for the Pound was further undermined as the UK’s quarterly growth figure came in below forecast.
Economists had anticipated a quarter-on-quarter growth rate of 0.6% in the final three months of the year following expansion of 0.7% in Q3.
However, growth actually slowed to 0.5%.
The data prompted this response from economist David Tinsley; ‘This is a slightly disappointing result. But this point should not be exaggerated. For one, only around half the final data is present in the first estimate of GDP, and future revisions could easily change hasty conclusions drawn today. For another, the pace of service sector growth showed no real sign of a slowdown. And the slowdown in industrial production in part reflected an unseasonably warm fourth quarter which depressed utilities output.’
The Euro to Pound Sterling (EUR/GBP) exchange rate achieved a high of 0.7497
The annual figure showed improvement, climbing from 2.6% to 2.7%, but a disappointing BBA Loans for House Purchase figure ensured that the EUR/GBP pairing held its gains.
On Wednesday the Euro slipped modestly against the Pound as Germany’s Import Price Index fell by more-than-anticipated in December.
The measure dipped by -1.7% on the month in December rather than slipping the -1.5% anticipated.
On the year, the index was down -3.7% at the close of 2014.
A figure of -3.4% had been forecast.
The Euro to Pound Sterling (EUR/GBP) exchange rate fell to a low of 0.7470
However, the common currency didn’t come under too much pressure from the result as the German GfK Consumer Confidence index climbed from 9 to 9.3 in February, exceeding predictions for a reading of 9.1.
GfK said of the result; ‘Consumers are noticeably more confident as they enter the New Year and the consumer climate is continuing to improve. Economic and income expectations, as well as the propensity to spend, have all increased tangibly. [9.4] is the highest level since November 2001. The upward trend is continuing in the consumer climate. The outlook for consumer spending is looking increasingly brighter.’
Ukraine Concerns, Greek Warnings Impact Euro (EUR)
However, as the session continued the Euro fell by 0.2% against the Pound and US Dollar in response to reports that members of the European Union issued warnings to Greece regarding the rolling back of budget cuts.
The Netherlands and Germany both adopted a hard line on the issue.
According to one representative from Germany’s Christian Democrats; ‘Germany bares no responsibility for what happened in Greece. The new Prime Minster must recognise that.’
The prospect of new sanctions being imposed on Russia over the Ukraine situation also took a toll on the common currency.
Given that new Greek PM Alexis Tsipras has just announced that Greece will not be defaulting on its debts, the common currency could fluctuate in the hours ahead. According to the BBC; ‘Addressing his first cabinet meeting since being elected on Sunday, the left-wing Syriza party leader said he would negotiate with creditors over the €240bn (£179bn; $270bn) bailout. Saying his first priority was to help those in need, Mr Tsipras promised “realistic proposals” for an economic recovery and vowed to fight corruption.’
Euro to Pound (EUR/GBP) Exchange Rate Forecast
The UK isn’t set to release any data today, which could limit movement in the EUR/GBP pairing, but investors will be looking ahead to tomorrow and the publication of the Eurozone’s Consumer/Economic/Services/Business confidence reports, as well as Germany’s Consumer Price Index and unemployment figures.
The Eurozone’s largest economy is expected to publish a CPI figure of -0.8% on the month and -0.1% on the year.
Although the European Central Bank (ECB) has already rolled out quantitative easing to help tackle disinflationary pressures, the Euro is liable to come under pressure if the pace of consumer price gains slowed.
The number of jobless people in Germany is expected to have declined by -10,000 in January, leaving the unemployment rate at 6.5%.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7482
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3363
The Euro to US Dollar (EUR/USD) exchange rate was trending in the region of 1.1353
The US Dollar to Euro (USD/EUR) exchange rate was trending in the region of 0.8803