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Pound Sterling Euro (GBP/EUR) Exchange Rate Slides on Better-than-Forecast Flash German Inflation

February 28, 2019 - Written by John Cameron

Pound Sterling Euro (GBP/EUR) Exchange Rate Slips as German Flash Inflation Edges Higher

The Pound Euro (GBP/EUR) exchange rate slid by roughly 0.3% this morning as Sterling pulled back from Thursday’s 21-month high against the single currency.

The pairing is currently trading at an inter-bank rate of €1.1664.

February’s flash German Harmonized Index of Consumer Price Index remained steady at 1.7% this afternoon, which likely buoyed the Euro.

Year-on-year inflation for Germany rose by a better-than-expected 1.6% from a previous 1.4%.

However, the annual inflation figure was below the European Central Bank’s (ECB) target level for the third month in a row.

Weakest UK Business Confidence since Brexit Referendum Weighs on Sterling

Early in the session data showed that UK consumer confidence edged higher than expected in February.

The Gfk Consumer Confidence survey improved slightly from -14 to -13 despite forecasts suggesting a further dip.

Commenting on the data, GfK Client Strategy Director Joe Staton said:

‘While the view on personal finances looking at the year to come is still marginally positive, the continuing depressed sentiment towards the general economic situation might point towards the calm before the storm of post-Brexit headwinds and potential negative economic outcomes.

‘Are we on the edge of some kind of economic or livelihood precipice? […] It is worth bearing in mind that many economic indicators (employment levels, wage growth) remain positive. But it is frankly amazing that confidence is so stoic and stable in a world of sharp political instability and fear of the unknown.’

However, this was likely offset by data that showed business confidence slipped to its lowest level since the month of the Brexit referendum.

According to the Lloyds Bank Business Barometer, business confidence slipped by 15 points to 4%.

Pound Euro Exchange Rate Outlook: Will GBP/EUR Slip on Strong German Unemployment?

The end of this week’s session could see Sterling rise against the Euro following the release of Germany’s Markit Manufacturing PMI.

If Germany’s manufacturing sector contracts further in February it could dampen sentiment for the Euro.

However, this slip could be offset by positive unemployment data from the Eurozone’s largest economy, Germany.

If German unemployment remains steady at 5% as forecast or unexpectedly slips, the Euro could receive an upswing of support.

Inflation data for the Eurozone could also cause movement in the GBP/EUR exchange rate.

If inflation growth weakens in February, falling lower than the previous 1.4%, the single currency could slip.

The Pound Euro (GBP/EUR) exchange rate could slide following the release of February’s UK Markit Manufacturing PMI.

The forecast anticipates manufacturing growth will lose some of its momentum, falling from 52.8 to 52.

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