Pound To Euro Exchange Rate Edges Higher In Spite Of Lower UK CPI Inflation Data And Positive German ZEW Survey

September 18, 2012 - Written by Ben Hughes

STORY LINK Pound To Euro Exchange Rate Edges Higher In Spite Of Lower UK CPI Inflation Data And Positive German ZEW Survey

Real data releases once again took centre stage during today’s session in the currency markets, with the publication of several key figures from some of the world’s major economies. The UK led the way this morning when the Office of National Statistics issued the latest official British CPI inflation numbers, which revealed that the rate of price rises in the UK economy slowed from an annualised 2.6% in July to 2.5% last month. The fact that domestic price inflation appears to be slowly drifting back down towards the government’s self-imposed target of 2.0% will be seen by many analysts as giving the Bank of England’s monetary policy committee leeway to consider a further loosing of UK monetary policy at next month’s meeting. We will learn more about the way the nine-man committee is thinking when the minutes of their September meeting are released tomorrow morning. Recent market babble has suggested that more QE may be on the cards before Christmas, and policy member Martin Weale’s recent calls for a cut in interest rates could also have come under discussion.

Elsewhere, the latest edition of the closely-watched German ZEW Sentiment Survey was also released this morning. This month’s ZEW Index bettered expectations to print at -18.2 – a marked improvement on August’s -25.5 showing. The figure will come as a major relief to investors holding euro-denominated assets who had been sweating on an apparent softening of the real economy in Germany.

The net effect of the two releases has been muted; GBP EUR had been firmly lodged in the 1.2300s in the 24hrs leading up to this morning’s European equities open. Towards the end of the session, the pair had broken higher to 1.2433, suggesting that institutional investors remain shy of holding the euro thanks to ongoing fears regarding the eurozone’s debt crisis.

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