Pound Euro Exchange Rates - GBP/EUR Trades Up as Eurozone Inflation Data is Downgraded. AUD Stays Strong.

April 4, 2011 - Written by John Cameron

STORY LINK Pound Euro Exchange Rates - GBP/EUR Trades Up as Eurozone Inflation Data is Downgraded. AUD Stays Strong.

The Pound Euro exchange rate (GBP/EUR) is 1.1357. The Euro Dollar exchange rate (EUR/USD) is 1.4210.

This morning’s Eurozone inflation figure caused some downward pressure on the Euro. February’s Eurozone Producer Price Index came out at 0.8%, as expected. However, at the same time, it was announced that January’s PPI figure was to be downgraded from 1.5% to 1.3%. This caused investors to slightly lower their sights for ECB interest rate hikes in the coming 12 months. However, expectations remain high for a 25bps raise by the ECB on Thursday. A 50bps rise, which had been rumoured, now appears unlikely.

Elsewhere this morning, the Eurozone Sentix Investor Confidence disappointed when it showed a reading of 14.2, compared to expectations of 16. Again, readings like this will not go unnoticed by ECB policy-makers.

Meanwhile, in the UK, interest rate expectations remain subdued and there has been little talk of a rate rise by the Bank of England next week. BoE commentators have recently alluded to current levels of UK inflation being due to ‘external factors’, (i.e. commodity prices). MPC members appear to feel that these factors will right themselves in the medium term and that a UK rate hike would be counter-productive.

Looking at the technical side of the equation, GBP/EUR reached its lowest level since October on 31st March, when it traded down to 1.1295. However, this level looks to have been rejected with the Pound trading as high as 1.1373 during today’s session. It looks possible that the Euro has strengthened as much as it is going to against Sterling in the near-term.

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TAGS: Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts