Last week’s high: €1.1587
Last week’s low: €1.1445
Surprisingly Dovish ECB Minutes Weigh Heavily on Euro
Unexpectedly dovish European Central Bank (ECB) meeting minutes put significant pressure on the Euro this week.
Policymakers expressed concern over the prospect of a global trade war, while also noting worries over the relative strength of the single currency.
This suggests that the ECB is likely to maintain a more cautious policy outlook in the near future, with policymakers looking to keep the Euro from strengthening further.
As a result, the GBP/EUR exchange rate rallied sharply on the back of the minutes, shrugging off the more mixed nature of the week’s UK data.
Even so, after the NIESR gross domestic product estimate for the first quarter clocked in at just 0.2% the underlying support for the Pound remained muted.
Confidence in the outlook of the Eurozone economy was also eroded by a surprise contraction in industrial production on the month.
With the currency union’s economic growth losing momentum since the start of the year the upside potential of EUR exchange rates looks limited.
Euro Outlook: Volatility Forecast on UK and Eurozone Inflation Data
If the finalised Eurozone consumer price index confirms that inflation accelerated from 1.1% to 1.4% on the year this could offer the Euro a rallying point.
As long as inflation shows signs of pushing towards the ECB’s 2% target this is likely to mute the downside bias of EUR exchange rates.
On the other hand, if the CPI is revised lower this could give the GBP/EUR exchange rate another strong boost on Wednesday.
Focus will also fall on the latest ZEW economic sentiment surveys, with the German confidence index forecast to decline on the month.
The GBP/EUR exchange rate could also find support if March’s UK consumer confidence index shows a renewed uptick in domestic inflationary pressure.
Higher inflation or wage growth figures are likely to boost bets on the prospect of the Bank of England (BoE) raising interest rates again in May.
09:30 UK Average Weekly Earnings
10:00 German ZEW Economic Sentiment Survey
09:30 UK Consumer Price Index
10:00 Eurozone Consumer Price Index
09:30 UK Retail Sales
07:00 German Producer Price Index
15:00 Eurozone Consumer Confidence Index
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