Pound Euro Exchange Rate (GBP EUR) Slides Following Higher Than Expected German Inflation Data

Modified: Wednesday, 2 January 2013 13:55 BST - Written by David Woodsmith

STORY LINK Pound Euro Exchange Rate (GBP EUR) Slides Following Higher Than Expected German Inflation Data

The year has started on an encouraging note for the Pound, with this morning’s release of UK PMI Manufacturing data for last month which revealed that activity levels in Britain’s factories had increased to its highest level since the Autumn of 2011. The figure, which showed at 51.4 versus analysts’ expectations of a 49.1 print, provides a glimmer of light for the UK PLC.

The start of this year had been expected to be a grim time for the Pound, following the Bank of England’s assertion last month that official figures would show that the UK economy contracted in the final three months of 2012. A credit downgrade for Britain’s government debt, meaning that the UK loses its AAA status has also been widely touted for the early part of this year.

In spite of the better than anticipated British manufacturing data, the Pound has lost ground against nearly all of the other sixteen most-actively traded global currencies, with the notable exception of the US Dollar, which continues to struggle as institutional investors shift funds out of their positions of safety in US Dollar-denominated Treasury Bills. Cable (currency : GBP USD) continues to linger at levels close to last night’s 16-month high and currently trades at 1.6305.

Meanwhile, the Pound Euro exchange rate (currency : GBP EUR), has slipped to sub-1.2300 levels on the day, and currently trades at 1.2288. The single currency has won support in the early part of this afternoon’s European session largely thanks to a higher than expected set of German CPI inflation figures for December, released earlier. The Teutonic inflation figures showed at an annualised 2.1% versus expectations of a 1.9% print, suggesting that a further loosening of monetary policy by the European Central bank is unlikely in the short term.

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