Pound Euro (GBP/EUR) Exchange Rate Fails to Capitalise on Steady UK Inflation

Pound Euro (GBP/EUR) Exchange Rate Fails to Capitalise on Steady UK Inflation

The historic measure of retail price inflation, which is still used to calculate payments on government bonds, student loans and many commercial contracts, edged down to 4.0 percent from December's six-year high of 4.1 percent.

This, however, only prompted a brief rise in demand for the Pound with markets still digesting the possibility that the United Kingdom and the European Union could fail to reach agreement on factors such as citizens' rights, the UK's acceptance of new European Union laws during any transition period and the ongoing disagreements over the Irish border.

The Pound Australian Dollar (GBP/AUD) exchange rate remained encumbered on Monday, failing to capitalise on hawkish comments from Bank of England (BoE) Policymaker Gertjan Vlieghe as markets continued to digest Barnier's assertion that a Brexit transition period is "not a given".

Analysts predicted that the print would slow to 10.

GBP/USD has trimmed its recent gains after the US dollar came back into fashion after a weak first month of 2018.

Australia's January business confidence survey from NAB were published during Tuesday's Asian session and beat expectations. The Australian Dollar benefitted from higher risk-sentiment and market anticipation for upcoming Australian ecostats.

As equity markets cooled from last week's brief selloff in stocks, investors returned to risk-correlated currencies like the Australian Dollar. As a result, AUD/GBP fluctuated on Tuesday rather than continuing its recovery.

This stronger-than-expected showing still helped to boost demand for the Pound (GBP), though, with markets inclined to bet on the possibility of the Bank of England (BoE) raising interest rates again sooner rather than later.

The pound skidded on Friday after the EU's chief Brexit negotiator Michel Barnier warned a transition deal was far from assured.

The pound's weekly losses came despite a surprisingly hawkish policy meeting from the Bank of England, which said interest rate rises could come sooner and more quickly than investors were expecting.

Looking ahead there are a number of noteworthy events this week that could cause volatility for the Pound Australian Dollar (GBP/AUD) exchange rate.

The most influential data this week for GBP/AUD investors though, is likely to be Thursday's Australian job market report from January.

However, if Australian data disappoints AUD/GBP could remain fairly close to its worst levels.

Even so, GBP exchange rates could find a fresh rallying point ahead of the weekend if January's United Kingdom retail sales data proves positive. Any news from UK or EU officials about the tone that UK-EU transition and trade talks could take may have an impact on the Pound outlook.

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