Turning to the euro, the pound to euro interbank exchange rose to a four-month high this week. A major reason for sterling’s gain versus the common currency has been the Brexit progress. Meanwhile, the Eurozone’s inflation remains way below target, said official data this week.
According to Eurostat, the Eurozone’s core inflation, which measures domestic price pressures in the currency bloc excluding external factors like imported food or crude oil, reached just 0.9% in August. This is in line with economists’ forecasts, yet stands well below the European Central Bank’s (ECB) target of close-to-but-below 2.0%.
This could be seen as a vindication of the ECB’s recent decision to cut interest rates and restart its extraordinary monetary stimulus, known as Quantitative Easing (QE), to stimulate the Eurozone’s economy.
Meanwhile, other economic releases from the Eurozone this week were mixed. On the bright side, ZEW’s monthly survey of economic sentiment in the currency bloc rose to -22.4 in September, far above market forecasts for -32.2, as well as August’s deeply negative -43.6.
Yet on the other hand, Eurozone construction output fell by -0.73% in July month-on-month, below forecasts for -0.7%, yet rose by 1.1% year-on-year. Elsewhere, looking to the immediate future, the Eurozone’s consumer confidence figures will be announced today. This could affect sterling’s value versus the euro, alongside the shifting Brexit situation.
Also, looking to next week, the Eurozone’s key releases will include IHS Markit’s PMIs (Purchasing Managers Indices) for the currency bloc and Germany for September, IFO’s poll of Germany’s business climate, and the European Commission’s survey of business and consumer confidence.
These will tell us if the continent’s households and companies still feel downbeat, as well as an early indication of whether the ECB’s decision to ease monetary policy has improved sentiment.
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