The Euro has lost ground in the last 24-hrs following sets of data showing that Euro-zone inflation has slowed markedly this month.
Last month we saw a near four-year high in Euro-zone price levels, but yesterday morning’s preliminary inflation readings from Germany showed a drop, and official readings for the whole bloc just came in below forecasts. Inflation is now back below the ECB’s target, which ultimately means that they will be in no rush to tighten monetary policy (e.g. put interest rates up)
In other news, the Pound has generally improved since the triggering of Article 50, as the general tone from the UK government and EU seems more conciliatory and traders have already heavily priced-in worst case scenario negotiations. That’s not to say the Pound is out of the woods yet because it could quickly lose ground again if the talks turn sour early on. However, If the negotiators continue to be friendly and headlines positive, then the market might start to rebuild their long positions on Sterling, as it is still very cheap around these levels.
As a result, the GBP/EUR is at a 4-week high which is up nearly 2.5cents from Wednesday’s low. A weekly close around these levels could reduce the friction of it going higher. The EUR/USD has dropped to a 2-week low and the GBP/USD remains reasonably steady around the 1.24 mark.