Excel Currencies Blog

Lower EU inflation sees the Pound move further on the Euro..

We mentioned yesterday that there was a good chance that if Germany recorded a lower than expected inflation number, that the Euro could weaken. A result of 6.1% versus a 6.5% forecast was some miss and it means inflation in the region is at its lowest level in a year. This has caused overall EU inflation (plus core inflation) to fall further than expected. 

£-€ has gained 0.5% on the back of the data as lower inflation levels should mean less interest rate hiking from the ECB. Comments from ECB President Lagarde after the release do suggest otherwise though.. "We cannot say yet that we are satisfied with the inflation outlook" and "We need to stick with the rate hikes until we are sufficiently confident that inflation is on track to return to 2% target in a timely manner".

Still, traders have decided the data is enough to prove that there is more to come from the BoE on interest rates than the ECB and so the Pound has jumped. It means current levels are just 1% lower than the years average and a transfer of £100,000 to Euros is achieving you €5,700 more compared to back in early February.