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Euro Pound Sterling (EUR/GBP) Exchange Rate Falls as Eurozone CPI Slides to 1.4%

April 1, 2019 - Written by John Cameron

Euro Pound (EUR/GBP) Exchange Rate Slides as Eurozone CPI Misses ECB’s 2% Target

The Euro Pound Sterling (EUR/GBP) exchange rate slipped this morning, and the pairing is currently trading at an inter-bank rate of £0.8570.

Data released on Monday showed that Eurozone inflation unexpectedly slowed which added to pressure on the European Central Bank (ECB).

March’s Consumer Price Index (CPI) slowed from 1.5% to 1.4%, and core CPI dropped from 1% to 0.8%.

Headline inflation is now far below the ECB’s target of 2%.

Commenting on the data, Commerzbank Economist Christoph Weil said:

‘Today’s price data should further depress inflation expectations in the market, all the more so as the headline inflation rate fell to 1.4% in March.

‘It is likely to remain well below the ECB’s inflation target of close to 2% over the rest of the year.’

Sterling (GBP) Buoyed as UK Manufacturing Jumps to 13-Month High

Data released this morning showed that March’s UK Manufacturing PMI rose to a better-than-expected 55.1.

Manufacturing rose to a 13-month high as stocks of inputs and finished goods rose at record rates.

The trend in manufacturing output rose in March as companies increased production to build-up inventories in advance of the UK’s departure from the EU and to meet rising new work.

Commenting on this, Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply said:

‘Businesses on both sides of the channel intensified their efforts this month to accumulate materials with the fastest increase in the stock building of finished goods since 1992, as the UK hurtled towards the Brexit deadline.

‘Supply chains paid a heavy price for this spike in activity as delivery times increased again and suppliers under the cosh for materials and finished goods struggled with demand and transportation issues.

‘This panic-buying had a marginally positive effect on job creation however, as increased Brexit preparations required more hands on deck and some businesses were carrying on regardless launching new products and markets.’

Euro (EUR) as Manufacturing Sector Shows Greatest Contraction for Nearly Six Years

This morning disappointing data was released from the Eurozone, which likely weighed heavily on the single currency.

The final data for March’s Eurozone manufacturing PMI showed the greatest contraction of the manufacturing sector for nearly six years.

March’s data saw the largest monthly decline in new orders since late-2012, and confidence in the bloc hit the lowest level in over six years.

Commenting on the data, Chris Williamson, Chief Business Economist at IHS Markit said:

‘The March PMI data indicates that the Eurozone’s manufacturing sector is in its steepest downturn since the height of the region’s debt crisis in 2012. The survey is indicative of output falling at a quarterly rate of approximately 1% in March, suggesting that the January rebound from one-off factors late last year seen in the latest official data is likely to prove short lived.

‘[…]The order-to-inventory ratio – a key indicator of the future production trend – is at its lowest for almost seven years. Expectations of output for the coming year are also the gloomiest since 2012.’

Euro Pound Outlook: Will the EUR/GBP Exchange Rate Fall as the House of Commons Reaches Brexit Consensus?

Later today, the Pound (GBP) could continue to rise against the Euro (EUR) as the House of Commons is due to resume its search for a way to proceed with Brexit.

Eight options will be put forward for voting once again which are either the same or similar to last week’s indicative votes.

Voting is expected to begin at 20:00 BST, and if the House reaches a consensus it is likely Sterling will rise.

However, on Tuesday morning the pairing could rise following the release of the UK construction PMI.

While March’s PMI is forecast to rise to 50 from 49.5, the figure shows that the construction sector will remain stagnant which would likely cause the Euro Pound (EUR/GBP) exchange rate to rise.

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