Pound slide continues as UK inflation misses

The pound continued to soften on Wednesday, slipping against many of its peers after domestic inflation failed to meet expectations.

Sterling is holding its ground this morning however, with GBP/EUR stable at €1.1543, GBP/USD flat at $1.3039 and GBP/CAD muted at C$1.7408, while GBP/AUD and GBP/NZD both hold steady at AU$1.8158 and NZ$1.9402 respectively.

Centre stage this morning will be the Eurozone’s latest PMI figures, which could cause the euro struggle if growth in the bloc’s private sector remained subdued in April.

What’s been happening?

The pound was left on the defensive throughout most of Wednesday’s session, with the UK currency coming under pressure after inflation fell short of expectations.

Data published by the Office for National Statistics showed that inflation held steady at 1.9% in March, missing forecasts it would rise to 2%.

This left it just outside the Bank of England’s target range of 2-3%, weakening Sterling as analysts suggested it would relieve pressure on the bank to raise interest rates this year despite heightened Brexit uncertainty.

The miss resulted in the GBP/EUR exchange rate briefly touching a four-week low yesterday, before the euro was made to part with some its gains after Germany halved it growth forecast for 2019, following some weak economic data in recent months.

Meanwhile, the GBP/USD exchange rate traded in a narrow range on Wednesday, as rising demand for riskier currencies left the safe-haven US dollar out in the cold.

What’s coming up?

Looking ahead, the highlight for markets today will likely be on the Eurozone PMI figures as they offer out first look at how the bloc may fare in the second quarter.

The euro could lose ground against its peers this morning if the PMI readings indicate the weakness in the Eurozone’s private sector extended into April, as this will likely fuel concerns that the bloc is facing a prolonged slowdown in 2019.

Meanwhile, the pound could come under additional pressure today as the UK’s latest retail sales result is expected to show a contraction in March as consumers cut back in the face of heighted Brexit uncertainty.

Finally, the US will publish its own retail sales figures later this afternoon, but with the US dollar likely to fare better as economists forecast the country will have enjoyed a strong rebound in sales growth last month.