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Pound Euro exchange rate slips from best money transfer rates

Published: 18 Jun at 3 PM Tags: Pound Sterling, Euro Exchange Rate, Dollar Exchange Rate, Euro Crisis, UK, Economy, Inflation,

The pound fell from its new 19 month high against the euro after softer than expected UK inflation data was published by the Office for National Statistics (ONS).

The ONS reported that the UK consumer price index (CPI) fell sharply in May to a 1.5% year-on-year pace from the 1.8% recorded in April. This is the lowest reading since May 2009.

Samuel Tombs, UK economist at Capital Economics commented that "Looking ahead, it continues to look likely that CPI inflation will ease further, perhaps to as low as 1% by the end of the year".

The ONS, in a separate report showed that UK house prices continue their upward march in April with price rises of 9.9% recorded in the year to April, up from 8% in the year to March 2014.

Of interest, UK house prices increased strongly across most parts of the UK with prices in London again rising by the biggest margin.

In the euro zone, the respected ZEW Institute reported lower than expected institutional investors´ optimism with the economic sentiment indicator for Germany falling unexpectedly to 29.8 from the prior reading of 33.1.

ZEW president Clemens Fuest commented that further increases in the pace of expansion of the German economy are becoming more difficult to come by and that there are signs that second quarter growth will be weaker than in the first three months of the year.

For the euro zone as a whole, the economic sentiment indicator also rose by less than expected.

The US dollar also benefited from the softer than expected UK inflation data and the US data out yesterday afternoon.

US consumer prices rose by 0.4% month-on-month and 2.1% in the year to May, ahead of analysts’ estimates.

Paul Dales, Senior US economist at Capital Economics commented that "With core CPI inflation rising to 2% in May, from 1.8% in April, the [Federal Reserve] will have to acknowledge in tomorrow’s policy statement that price pressures are building. The chances that it will hike interest rates before the middle of next year are increasing."

A separate report showed that US housing starts fell by 6.5% month-on-month in May to reach an annualised rate of 1,001 million units, less than had been expected by analysts

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