GBP/EUR Gains May be Limited after Gloomy IMF Statements
The International Monetary Fund (IMF) released statements and forecasts for global growth this afternoon that softened the Pound’s rally despite this morning’s bullish inflation data.
The organization focused on the possibility of a ‘Brexit’, the BBC reports, arguing that the UK leaving the European Union would cause major challenges and global damage, not just for Britain itself but for the rest of Europe too.
Since then, the GBP/EUR pair has slumped from 1.2540 to around 1.2494, though it is still slightly above the day’s opening levels.
Earlier…
UK Inflation Data Sends the Pound Sterling to Euro (GBP/EUR) Exchange Rate Higher Today
With both core and non-core UK inflation printing above expected levels, the Pound Sterling to Euro exchange rate was able to consolidate and extend previous gains on Tuesday, pushing above the 1.25 level.
Tomorrow’s Eurozone industrial production data is liable to prompt some further GBP/EUR exchange rate movement, but as it stands the pairing is trending in the region of 1.2548.
Earlier…
The Pound Sterling to Euro (GBP/EUR) exchange rate soared a whopping 120 pips during Monday’s session despite tax rows enveloping the nation after Prime Minister David Cameron published his tax returns as Parliament reconvened.
The pairing pushed away from 1.23 and approached 1.25 ahead of the release of the UK’s latest inflation figures.
House of Commons Enters Damage Control Mode Amid Steel, Tax, and ‘Brexit’ Issues
The House of Commons returned from a long Easter holiday on Monday morning and immediately set to discussing the issues that have plagued British headlines for the last few weeks.
The Easter break began on the 24th of March and lasted right up until the 11th of April, unfortunately meaning that UK Parliament had been unable to take quicker action on recent issues.
Pound confidence jumped as Monday began, with GBP/EUR sailing up 0.7% from the morning’s opening levels of 1.2389 and trending in the region of 1.2484.
Investors anticipated that damage control measures and solutions discussed by Parliament would bolster confidence in Britain and by extension reignite Pound favour slightly. As a result, many investors readjusted their Sterling positions to take advantage of profit taking.
The issues put forward to be discussed by Parliament include the ‘Panama Papers’, the Tata Steel UK crisis, and the public uproar over HMRC’s EU referendum leaflets.
David Cameron faced Members of Parliament yesterday to defend himself over ‘Panama Papers’ allegations, while Chancellor George Osborne published his own tax returns.
Investors were also reassured by an announcement that Tata Steel would sell its Scunthorpe plant to Greybull Capital, securing at least 4,400 UK jobs.
ECB Policymakers Inspire Euro (EUR) Uncertainty in Investors
Pressure has mounted on the European Central Bank since the most recent policy meeting minutes were released last week – and investors are uncertain of where they stand on the shared currency as a result.
While ECB policymakers agreed that the Eurozone’s economy needed further easing in order to stimulate inflation, some officials were unable to agree on what measures should be taken, ending the announcements with consensus but not unanimous decisions.
Alternative easing methods were proposed during the meeting, some of which may go on to be utilised in the future if deflation continues.
Previous comments from ECB President Mario Draghi have sparked controversy in Germany. According to the Financial Times, Draghi’s comment about helicopter money in March, despite not being seriously considered by the ECB in any official capacity, frustrated German officials and increased tension between the central bank and Berlin.
German political leaders also blame the ECB’s monetary easing policies for the rise in popularity of a right-wing party known as ‘Alternative for Germany’ (AfD), the most successful right-wing party in Germany since World War II.
Tensions between Eurozone nations and the ECB’s perceived lack of success have weighed down the Euro, allowing the Pound to make gains.
Pound Sterling to Euro Exchange Rate Forecast: Data to Drive GBP/EUR Today
The GBP/EUR pair may finally have a break from being politically driven today as key datasets are due for release from both Britain and the Eurozone.
Quite a large variety of UK data is due this morning, most vital being March’s Consumer Price Index (CPI) print. The key indication of Britain’s inflation is currently expected to score 0.4% over 0.3% in its yearly figure, with Core CPI for the same period expected to release at 1.3% over 1.2%.
All UK CPI figures are forecast to be 0.1% improvements, but lower-than-expected scores would likely follow last week’s disappointing UK data in weighing down the Pound. House price data for February is also due, alongside retail price index, producer price index and small business optimism data.
The Eurozone has comparatively less to show today, with Final German CPI figures due for release early this morning. Both prints are currently expected to show steady inflation, holding a monthly figure of 0.8% and a yearly figure of 0.3%.
Developments in Britain’s ecopolitical landscape are also likely to influence GBP/EUR movement and potentially allow the Pound to extend gains.