GBP/EUR Exchange Rate Softens over Concerns for UK’s Long-Term Growth
The Pound Sterling to Euro (GBP/EUR) exchange rate is edging lower this morning as the UK’s latest GDP figures failed to inspire confidence in UK economy, despite a rise in growth.
At the time of writing the GBP/EUR exchange rate is down roughly 0.2% from this morning’s opening levels, leaving the pairing to fall just short of €1.15.
Pound Sterling (GBP) Dented by Mixed GDP Figures
The Pound (GBP) is drifting lower against the Euro (EUR) and the majority of its other peers this morning as markets react to the UK’s latest GDP figures.
According to data published by the Office for National Statistics (ONS), the UK economy accelerated in the third quarter, with growth jumping from 0.4% to 0.6% – the fastest pace of expansion since 2016.
While the headline figures appeared positive, to analysts they were seen as masking some of the UK economy’s underlying weakness, with some suggesting the bump in growth will be short-lived. This assessment was highlighted by a stall in growth in both August and September.
Suren Thiru, head of economics at the British Chambers of Commerce, said:
‘It remains likely that the stronger growth recorded in the third quarter is a one-off for the UK economy, with persistent Brexit uncertainty and the financial squeeze on consumers and businesses likely to weigh increasingly on economic activity in the coming quarters.’
Euro (EUR) Exchange Rates Dented by Italy Concerns
At the same time the Euro (EUR) has found its gains limited this morning as the ongoing budget row between Rome and Brussels continues to weaken sentiment in the single currency.
The release of the European Commission’s (EC) latest forecasts on Thursday only appears to have escalated the dispute as the EC’s prediction that the Italian economy will only grow 1.2% in 2019 indicates Rome’s budget plans will see it run a deficit of 2.9% rather than the already controversial 2.4% deficit put forth.
Italy’s finance minister will meet with EU officials later today to discuss the budget, but with both sides refusing to back down it looks unlikely to result in a breakthrough.
GBP/EUR Exchange Rate Forecast: Robust Wage Growth Figures to Bolster Sterling?
Looking ahead to next week’s session, the UK’s latest labour report looks set to shape the tone for the Pound Euro (GBP/EUR) exchange rate over the first half of the week as investors eagerly await the UK’s latest wage growth figures.
With wage growth having rocketed up to 3.1% in August the focus for markets will be whether this will have carried through to the end of the third quarter, with GBP investors hopeful a solid reading will bolster the chances of a rate hike from the Bank of England (BoE) next year.
Meanwhile EUR investors will be focused on the release of Germany’s GDP estimate on Wednesday, with the Euro likely to face heavy losses if the Eurozone’s largest economy contracted in the third quarter as expected.