Pound Sterling to Euro Exchange Rate Forecast Falls on Inflation Data, Budget Concerns and Data Deficiency

March 22, 2016 - Written by Toni Johnson

STORY LINK Pound Sterling to Euro Exchange Rate Forecast Falls on Inflation Data, Budget Concerns and Data Deficiency

The future before Good Friday does not look good for Sterling, as in addition to there being little data to begin with, tomorrow's retail sales offerings are expected to decline on previous printings.

The Pound has crashed against the Euro and virtually all other currencies today due to the UK Budget's biggest issues not being resolved by Chancellor George Osborne in the House of Commons.

GBP/EUR Exchange Rate Pressured Lower by Below-Forecast UK Inflation Data

This morning’s official UK Consumer Price Index data has heaped further pressure on the Pound Sterling (currency : GBP). The Office of National Statistics (ONS) numbers showed that British inflation remained at a year-on-year 0.3% last month – analysts had been anticipating at a slight increase to an annualised 0.4%.

The ONS noted in its report which accompanied the figures that today’s data, ‘maintains the position seen over the last few months of a rate which is a little above zero’. The statement went on to confirm that, ‘the largest downward contribution came from the transport sector, from price changes for items such as road passenger transport, second-hand cars and bicycles. Rising food prices, particularly for vegetables, offset this.’

With Inflation Low, is the Bank of England (BoE) Unlikely to Raise Interest Rates in 2016?

The ONS put the figure in context by observing that domestic inflation, ‘is unchanged from January 2016 and follows 3 consecutive months of small rises although it remains relatively close to zero and low in the historical context. This continues the position seen since the beginning of 2015. Looking at the last 14 months overall, prices for transport costs, food and non-alcoholic beverages and (to a lesser extent) recreational and cultural goods and services have had a downward pull on the rate of inflation. These have been counterbalanced by an upward pull from price movements for other goods and services, most notably restaurant and hotel bills, and education costs such as university tuition fees.’

Pound Sterling to Euro (GBP/EUR) Exchange Rate Sinks to 1.2708

The Pound Sterling to euro exchange rate sank to as low as 1.2708 GBP EUR in response to these numbers, while the Sterling to US Dollar exchange rate dropped into the mid-1.4200s as a result. Elsewhere, there was more bad news for the Pound when February’s Public Sector Net Borrowing statistics showed at a higher than anticipated £6.5bn. Analysts had been expecting that the British government’s borrowing requirement last month would show at a manageable £5.3bn. Analysts therefore forecast that there could be further losses to come for the UK unit.

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TAGS: Currency Predictions Daily Currency Updates Euro Forecasts