Sterling is currently trading at around €1.142 against the euro, unchanged from the day’s opening levels, following the release of the Eurozone inflation figures.
The euro found its attempt to advance against Sterling brought to an abrupt halt this morning by the release of the Eurozone’s latest consumer price index.
The CPI showed that inflation slipped from 1.4% to 1.3% last month, in line with market expectations and reaching its lowest levels in 2017.
The data is likely to put a further dampener on any hopes that the European Central Bank (ECB) is moving towards tightening stimulus as policy makers frequently pointed to lacklustre Eurozone inflation in recent months as a sign the bloc is not yet ready for higher interest rates.
According to Eurostat; “The largest upward impacts to the euro area annual inflation came from accommodation services (+0.08 percentage points), package holidays (+0.06 pp) and tobacco (+0.04 pp), while telecommunication (-0.10 pp), social protection (-0.04 pp) and bread & cereals (-0.03 pp) had the biggest downward impacts.”
With the ECB gathering later this week for its latest monetary policy meeting, today’s data supports the argument that the Eurozone is still in need of the central bank’s expansive stimulus programme.
If the ECB maintains a cautious stance later this week it would be another blow to EUR investors, many of whom had hoped that the bank would begin discussing the possibility of tapering its quantitative easing programme later this year following the recent uptick in economic indicators for the currency bloc and hawkish comments from ECB President Mario Draghi.
Meanwhile the pound remains in a position of strength this morning thanks to continued speculation of a rate hike from the Bank of England (BoE). Despite most policymakers signalling they would vote to leave rates unchanged, comments from a couple of hawkish members of the Monetary Policy Committee (MPC) continue to stoke rate hike…