Euro Pound (EUR/GBP) Exchange Rate Steadies as German Inflation Figures Hit 11-Month Low

April 11, 2019 - Written by John Cameron

STORY LINK Euro Pound (EUR/GBP) Exchange Rate Steadies as German Inflation Figures Hit 11-Month Low

EUR/GBP Exchange Rate Steadies Following ECB’s Cautiousness

The Euro Pound (EUR/GBP) exchange rate is steady today and is currently trading around £0.8620 on the inter-bank market.

The Euro (EUR) steadied against the Pound (GBP) following the release of the German Harmonized Index of Consumer Prices figures for March fell to 1.4% – an 11-month low.

Today also saw the publication of the French inflation figures for March, which held steady at 0.9%.

Yesterday, meanwhile, saw the European Central Bank (ECB) hold its interest rate at 0.0%, while the President of the bank, Mario Draghi, remained dovish.

Antonio Garcia Pascual, an Economist at Barclays, summarised Draghi’s approach:

‘Overall, we thought President Draghi delivered a very cautious message… leaving open the possibility of easing monetary policy further if macro conditions do not improve in the coming months.’

Sterling, however, has stabilised after the EU granted the UK a 6-month – until 31 October – extension to the Brexit process during a 5-hour emergency summit last night.

This delay was not as long it was expected to be, with French President Emmanuel Macron remaining critical of the UK’s political difficulties, saying, ‘We do not want to import Britain’s political crisis into the EU.’

GBP/EUR Exchange Rate Flat as Tusk Warns Parliament ‘Not to Waste This Time’

Today saw the release of the UK RICS housing price balance figures for March, which came in at a disappointing -24%.

Simon Rubinshon, a Chief Economist at RICS, remained pessimistic, saying:

‘Whether any [Brexit] deal provides the shift in mood music envisaged by many respondents to the survey remains to be seen but as things stand, there is little encouragement to be drawn from key Rics lead indicators.’

Economic data, however, has been overshadowed by Brexit concerns today, as Prime Minister Theresa May now has to face an increasingly divided Parliament and, for the fourth time, attempt to gain a majority backing for her withdrawal agreement.

The President of the European Council, Donald Tusk, effectively warned UK MPs, saying:

‘This extension is as flexible as I expected and a little bit shorter than I expected but it is still enough to find the best possible solution. Please do not waste this time.’

EUR/GBP Forecast: Pound Could Rise if May’s Deal Gains Traction

Euro traders will be looking ahead to the publication of the Eurozone’s industrial production figures for February tomorrow, which are expected to sink.

Tomorrow will also see the publication of the Spanish CPI figures for March, which, however, are forecast to hold steady.

The EUR/GBP exchange rate will be dictated by Brexit developments in the coming weeks, with focus being on Theresa May’s next steps as she has to forge support for her divisive withdrawal deal.

Any signs of a consensus emerging within Parliament in favour of May’s deal, however, could see the Pound rise.

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