Euro Pound Exchange Rate Spikes Following Disappointing UK CPI Inflation Data

November 12, 2013 - Written by Toni Johnson

STORY LINK Euro Pound Exchange Rate Spikes Following Disappointing UK CPI Inflation Data

This morning’s UK Consumer Price Index inflation numbers clearly hurt the Pound Sterling on the day. However, there are several factors behind today’s downward move for the GBP EUR exchange rate.

The stars aligned against the Pound Sterling Euro exchange rate (GBP/EUR) during today’s session, sending the pair down to below its European Central Bank interest rate cut levels of last Thursday morning.

The main contributory factor behind GBP/EUR’s downward shift on the day was this morning’s British inflation numbers which printed well outside the consensus expectation of analysts. The UK cost of living figure showed at a year-on-year 2.2% versus an anticipated 2.5%, suggesting that the rate of UK price rises is rapidly coming into line with the British government’s CPI target of an annualised 2.0%.
The implication of the cooling off in the rate of British consumer prices is that the Bank of England is now under very little pressure to raise interest rates any time soon. Prior to today’s data, most analysts had been expecting the BoE to hike interest rates in the medium term, with an increase of 25 basis points factored-in for late 2014 / Q1 2015.

More to this Week’s Euro Pound Exchange Rate Forward Move

However, there has been more to this week’s forward move in EUR GBP than today’s inflation numbers. This morning’s news that the eurozone’s policymakers agreed a budget deal for 2014 following an all-night round of negotiations in Brussels drew support for the single currency during today’s session. The fact that the deal saw the 27 member states agree to trim the region’s budget by a hefty 6% was viewed by investors as another reason to support the euro on the day.

The Pound to Euro exchange rate (GBP/EUR) is currently trading down by 0.60% at 1.1853 GBP/EUR. The Euro to Pound exchange rate is currently trading at 0.8437 EUR/GBP.

Meanwhile, today’s official figures from the Office of National Statistics which revealed that its index of British property prices pulled back from September’s record high of 186.0 to show at 184.9 last month came as bad news for investors looking for the emergence of a new UK house price bubble to provide support for the Pound.

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