The Euro to Pound Sterling (EUR/GBP) exchange rate weakened to a new 7-year low on Friday and more losses are forecast after UK data came in better than expectations and as the markets continue to reel from yesterday’s European Central Bank (ECB) policy announcement.
EUR/GBP Exchange Rate Slides to 0.751
Following yesterday’s announcement by the ECB that it would soon launch a massive monetary stimulus programme worth €1 trillion the Euro tanked against all of its most traded peers and more falls are forecast.
ECB President Mario Draghi hopes that the massive stimulus measures will return inflation to the ECB’s goal of just under 2% and increase growth in the struggling economic region.
‘It’s a good start on a long road. They seem to have exceeded market expectations instead of underperformed and that is good. It’s clear that it had to be open-ended to raise inflation expectations,’ said an analyst.
Economists have now begun to focus on Sunday’s Greek general election, which could see a victory for the anti-austerity Syriza party.
‘The Greek election provides another reason to sell Euro in case the ECB decision was not enough. A period of consolidation is reasonable today, but there is no reason to believe a low is in place,’ said Sean Callow, a currency strategist from Westpac.
In a poll published late on Thursday, Syriza got 32.5% support against 26.5% for Antonis Samaras New Democracy party.
A Syriza win would end four decades of political supremacy by New Democracy and the socialist party Pasok and set up challenges to the establishment elsewhere in Europe, provoking fresh questions about the integrity of the Euro.
Sterling Rises on UK Data
The Pound meanwhile advanced after data released by the Office for National Statistics (ONS) showed that UK retail sales increased unexpectedly in December adding to signs that the UK economy is diverging from that of the Eurozone.
On an annual basis overall retail sales, were 4.3% higher, beating economist forecasts for a figure of 3%.
On a month on month basis, sales rose by 0.4% defying expectations for a decline of -0.6%.
Euro Exchange Rates:
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