THE pound surged against the euro as German inflation fell short of expectations to give a big setback for the European Central Bank (ECB) programme to support the eurozone economy.
Sterling lifted by 0.8 per cent against Europe’s economy to 1.1643, after the cost of living in Europe’s largest economy came in at 1.5 per cent – tumbling from 2.2 per cent in February.
Markets had expected an inflation reading for March of around 1.9 per cent, with the shock leading to euro sell-offs.
The ECB’s huge current money-printing programme has been designed to stoke rising prices and kick the economy into action.
Policymakers at the central bank had recently sounded more upbeat on the outlook amid rising inflation across the bloc and signs of growth.
This assessment had raised hopes the ECB could perhaps cut short the money-printing programme, which injects billions of euros into the economy each month.
But the fall in German inflation will be seen as a sign that money-printing will not be reigned in any time soon.
It comes after Britain’s currency yesterday shook off fears over the beginning of Brexit negotiations, with sterling traders failing to show any large signs of panic.
At the same, French elections are drawing closer, with investors keeping a close eye on the popularity of anti-Brussels candidate Marine Le Pen.
If the Front National leader wins she is set to draw a Frexit vote, which could spell disaster for the euro.