Pound to Euro Exchange Rate (GBP EUR) Tumbles On UK Inflation Figures

May 21, 2013 - Written by David Woodsmith

STORY LINK Pound to Euro Exchange Rate (GBP EUR) Tumbles On UK Inflation Figures

This morning’s main event in the global currency markets came in the form of the publication of the latest headline inflation data from the UK’s Office of National Statistics (ONS). The April Consumer Price Index figure showed at significantly below the expected annualised level of 2.6%. The year-on-year print of 2.4% was considerably lower than March’s 2.8% showing, suggesting that price pressures in the British economy are easing.

The ONS’s analysis of the data attributed the drop-off to lower transportation costs, and in particular to lower fuel prices which affect the price of air fares as well as the cost of petrol at the pump. The ONS went on to posit that the price rise figure would have been lower still were it not for a particularly wet winter which effected crop output, pushing UK food prices higher.

The publication of the inflation data saw analysts tripping over themselves to jump on the ‘Quantitative Easing’ charabanc once more. Recent Bank of England monetary policy committee meetings have seen three of the nine man committee, including the current Governor Mervyn King, vote to increase the GBP375bn already allocated to the controversial programme.

The minutes of the MPC’s April committee meeting, which are set to be released tomorrow morning, will provide further guidance for investors holding Sterling. We already know that less than five committee members voted for more QE. If the minutes reveal that the number in favour was four, then more QE for the UK would appear to be likelihood in the short to medium term. Such an outcome would be likely to cause the Pound to give up ground against all of the other sixteen most-actively traded currencies.

This morning’s British price rise figures have sent the Sterling to euro exchange rate (currency : GBP EUR) down as low as 1.1773. Tomorrow morning could elicit further downside for the pair, depending on the vote split and tone of the bank of England minutes.

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