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Currency News: UK Inflation Data Fails To Send GBP EUR Exchange Rate Higher

August 13, 2013 - Written by James Fuller

An ‘on the money’ print for today’s UK inflation data has failed to send GBP EUR higher. The headline figure of 2.8% suggests that UK monetary policy will not be loosened any further for some time.

The GBP/EUR exchange rate is currently 1.1654, the EUR/GBP exchange rate is currently 0.8581.

This morning’s UK CPI inflation numbers came in exactly as per analysts’ expectations, revealing that the rate of British price rises fell to 2.8% last month. The figure remains well above the UK government’s target of 2.0%, suggesting that the Bank of England will avoid any further loosening of monetary policy, probably for the remainder of the year. The UK central bank will instead depend on its ‘forward guidance’ statements in an effort to encourage Britain’s retail banks to start lending in larger volumes to individuals and UK Small / Medium Enterprises.

Ceteris paribus, today’s inflation data should have triggered renewed support for the Pound, sending the Sterling euro exchange rate (currency : GBP EUR) up towards the 1.1700 threshold. However, GBP EUR has remained resiliently lodged in the lower part of the 1.1600s throughout today’s session, suggesting that investors remain wary of holding Sterling-denominated assets thanks to fears that the Bank of England will continue to ‘talk down’ the UK tender.

Gains for the Pound euro exchange rate (currency : GBP EUR) would surely have been of a greater magnitude were it not for this morning’s highly positive German ZEW Survey which showed at 42.0 versus analysts’ expectations of a print of 39.9. This was significantly ahead of last month’s showing of 36.3 suggesting that conditions are improving in the eurozone’s premier economy.

This afternoon’s key data set of note came from North America in the form of last month’s Advance Retail, Sales data. The closely-watched shop sales number came out slightly below expectations at 0.2% and the US Dollar has strengthened somewhat, sending the Pound US Dollar exchange rate (currency : GBP USD) down into the low 1.5400s.

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