EUR USD Rate Hits 4-Month High, GBP EUR Drops

Published: Tuesday, 18 June 2013 14:00 BST - Written by Ben Hughes

STORY LINK EUR USD Rate Hits 4-Month High, GBP EUR Drops

Two European data releases have dominated price action in the currency markets so far today. The latest headline UK inflation figure lead the way in the early part of the session, providing a fair wind for the Pound. The May Consumer Price Index figure revealed that rate of British price increases jumped from 2.4% in April to 2.7% last month. The release appears to make a vote by the Bank of England monetary policy committee to add to its £375bn Quantitative Easing programme an unlikely prospect in the short term. However, new Bank of England Governor, Mark Carney, who takes over the top job at Threadneedle Street at the start of next month, may have different ideas.

The higher than anticipated UK inflation number provided some support for Sterling, sending the Pound to Euro exchange rate (currency : GBP EUR) up to as high as 1.1733 in the immediate aftermath of its release. However, the gains for Sterling did not stick and just half an hour following the UK release came the publication of the latest ZEW Economic Sentiment survey in Germany. The gauge of confidence in the eurozone’s premier economy printed at 38.5 versus estimates of a 38.1 showing. The fact that it was a significant improvement on last month’s 36.4 provided the single currency with considerable forward momentum which sent GBP EUR down to an intraday low of 1.1668 a short time ago.

Movement for GBP EUR has also been determined on the day by price action for the world’s major currency pair – EUR USD. Fears regarding the possibility that the US Federal Reserve will announce that it is cutting back on the monthly $85bn which it currently commits to its QE programme sent the key pair to its highest level since the middle part of February during today’s morning session. The move to 1.3399 for EUR USD caused the GBP EUR exchange rate to head southwards as investors arbed their positions. Further movement is anticipated for both pairs in the lead-up to tomorrow evening’s Fed decision.

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