The Pound to Euro (GBP/EUR) exchange rate climbed by around +0.40% in the afternoon of Friday’s European trading after the European Central Bank’s (ECB) Peter Praet commented on inflation and ecostats showed the currency bloc’s consumer price index had fallen from 1.3% to 1.2% in February.
The ECB’s Chief Economist, Peter Praet, commented on unexpected slack in the Eurozone’s economy, suggesting that it could create a drag on inflation. The economist said:
‘Mario Draghi [European Central Bank Chief] was opening the conversation on the possibility that there may be more slack in the economy. That still needs to be confirmed but we already have strong evidence of a strong labour supply reaction.’
When it came to the topic of interest rates, Praet echoed Draghi’s recent comments and told Reuters reporters, ‘We will proceed at a gradual pace, or a measured pace.’
‘Markets expect us to avoid cliff effects. So people can judge what is coherent with a notion of prudence and could conclude that we will gradually bring net asset purchases to an end once the Governing Council sees a sustained adjustment path. I think it is well understood by the market.’
Meanwhile, the Pound was offered some support earlier in the week and has remained buoyant as the markets looked to the weekend. Chancellor to the Exchequer Philip Hammond delivered his Spring Statement, referring to himself as ‘Tigger-like’. The upgraded UK growth forecasts and other points mentioned in the statement has appeared to have buoyed Sterling.
This week the Pound has also been climbing against the Turkish Lira (GBP/TRY). The Turkish currency weakened to a three-month low against the US Dollar (TRY/USD) on Thursday at 3.98 (USD/TRY) when concerns over conflict in Syria and economic data showed Turkey has high levels of inflation against a growing current account deficit. The Turkish Lira to Euro (TRY/EUR) hit a record low figure of 3.90 (USD/TRY).