Pound Euro Exchange Rate About to Break Back Below 1.19 as ZEW Survey Smashes Expectations - the optimists now outweigh the pessimists
A look at the wholesale markets in late morning trade in London shows:
The Pound to Euro exchange rate is converting at 1.1903; 0.17 pct down on last night's close.
The Euro to Pound exchange rate is at 0.8401.
RBS yesterday forecasted the end of the Sterling rally. Is this the start?
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Euro in fresh advance as the optimists outweigh the pessimists
The standout story of the morning from a data perspective is that of a convincing data release in the Eurozone.
At 10AM it was reported that the ZEW Survey Economic Sentiment (Sep) smashed expectations by coming in at 58.6. Forecasters had only expected 47.2.
The Economic Sentiment published by the Zentrum für Europäische Wirtschaftsforschung (ZEW) measures the institutional investor sentiment, reflecting the difference between the share of investors that are optimistic and the share of analysts that are pessimistic.
A positive number means that the share of optimists outweighs the share of pessimists.
UK inflation sends Sterling lower
The grind lower for the Pound to Euro exchange rate began following the release of UK inflation numbers at 09:30 today.
UK inflation turned tame in August sending cable a bit lower in morning London trade as BOE faced no price pressures to change its dovish stance for now.
UK consumer prices continued their slow but steady decline coming in at 2.7% versus 2.8% the month prior, but it was the core reading and the PPI input numbers that showed the true trend in pricing.
PPI input printed at -0.2% versus 0.3% eyed while core CPI reading matched last month's 2.0% rate.
"After a protracted bout of persistently high inflation the UK economy appears to have finally obtained some control over the pricing pressures as the core reading has remained at 2.0% for 3 out the past 5 months. Headline numbers meanwhile have hovered at 2.5% to 2.7% for most of this year after peaking at 5.2% in 2011," says Boris Schlossberg at BK Asset Management.
According to Schlossberg the decline in prices was a disappointment for British Pound Sterling bulls as it offers ample scope for the BOE to maintain its highly accommodative bias despite clear improvements in UK economic growth.
The Bank of England has pursued an aggressive forward guidance policy that is likely to keep UK rates low for the foreseeable future.
"With inflation data muted the BOE has no reason to adjust its policy for now," says Schlossberg.