Pound euro exchange rate: GBP steady against EUR as eurozone inflation sags

The end of last week saw a much weakened pound under further pressure following the EU’s refusal to consider amending Theresa May’s Brexit deal, with the Prime Minister coming away from Brussels empty-handed. This week, the pound has steadied against the major currencies on a lack of fresh data and anything new happening with Brexit, although that could change at any moment. News overnight from Rightmove that UK house prices retreated by an average of 1.5 per cent in December has not instilled confidence in Sterling traders given that prices also retreated by 1.7 per cent in November. This means that the average asking price has dropped by £10,000 since October, with the property market on track for its worst annual performance in a decade. 

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The gathering slump may have been influenced by overseas landlords pulling out of the British property market due to a combination of a tougher buy-to-let tax regime, stalling price growth and the sinking value of Sterling since 2016.

Estate agents Hamptons International reported that the share of overseas landlords in the market has more than halved in this year alone, with the retreat most pronounced in London, where a level of 26 per cent foreign ownership of rental properties has slumped to 10.5 per cent in 2018.

With many landlords resident in the Eurozone, the sinking value of the pound against the euro has cut into their profit margins, making UK property less attractive as an investment.

At the same time, this morning saw the release of the Eurozone’s latest trade balance and inflation figures in the form of the Consumer Price Index. 

November’s Eurozone CPI showed more signs of economic malaise, dropping to 0.3 per cent against expectations of a fall to 0.2 per cent.

The trade balance figures were slightly more positive, revealing a trade surplus of €14bn in October.

Nevertheless, sinking inflation will likely cause more headaches for the European Central Bank, delaying the chances of any potential rate hike in 2019 and reducing sentiment in the single currency.

There is no further noteworthy data due out for either the UK or the Eurozone today, so the pound euro exchange rate is likely to be driven be headlines and sentiment for the rest of the day and throughout tomorrow as well, with a raft of UK inflation data due on Wednesday ahead of Thursday’s Bank of England interest rate decision.

source: express.co.uk