Pound Sterling Euro (GBP/EUR) Exchange Rate News: Euro Weakens as Eurozone GDP Halves in Q2

GBP/EUR Exchange Rate Climbs Higher on Eurozone Data

The Pound to Euro (GBP/EUR) exchange rate is drifting higher this morning as markets react to a slew of Eurozone economic data.

At the time of writing the GBP/EUR exchange rate is trading at around €1.0918, trading slightly up from this morning’s opening rate.

Slowdown in Eurozone GDP Weakens the Euro (EUR)

The Euro (EUR) is trending lower against the Pound (GBP) and the majority of its other peers this morning following the publication of the Eurozone’s latest GDP report.

According to data published by European Statistics Agency, Eurostat, economic growth in the Eurozone slowed from 0.4% to 0.2% in the second quarter, in line with market forecasts.

It’s worth noting that this preliminary reading excludes Germany, whose economy is feared to have stagnated or even contracted in Q2, and could lead to the second estimate being revised lower.

On top of this, the publication of the Eurozone’s latest CPI figures appear to have to have put further pressure on the Euro this morning as headline inflation dropped from 1.3% to 1.1%, its worst levels since February 2018.

Taken together the gloomy GDP and inflation figures are highly likely to put even more pressure on the European Central Bank (ECB) to begin easing its monetary policy, and got lead to a more aggressive rate cut in September than previously forecast.

Pound (GBP) Bottoms Out as Brexit Panic Selling Fades

Following on from the heavy sell-off seen through the first part of the week, the Pound appears to have stabilised after drifting into oversold territory.

However there looks to be little hope for any substantial recovery in Sterling as the currency’s upside potential remains capped by fears that Boris Johnson’s new government has put the UK on the path towards a no-deal Brexit.

This in turn appears to increase the odds that a general election will be held sometime in the coming months, with the prospect of further political uncertainty in the UK likely to further limit the appeal of Sterling going forward.

GBP/EUR Exchange Rate Forecast: Will a Dovish BoE Renew the Sterling Sell-Off?

Looking ahead to the second half of the week, the Pound to Euro (GBP/EUR) exchange rate may come under pressure again as the Bank of England (BoE) concludes its latest policy meeting.

Whilst no policy changes are expected from the BoE this month, Sterling is still likely to weaken as the bank is widely expected to strike a more dovish tone in its forward guidance in response to deteriorating UK economic data and the rising risks on a no-deal Brexit.

Also likely to limit the appeal of the Pound through the second half of the session will be the publication of the UK’s latest PMI figures, which are forecast to show that growth in the UK’s manufacturing and construction sectors continued to deteriorate in July.

Meanwhile, the publication of the Eurozone’s latest retail sales figures may help to buoy the Euro at the end of the week, if sales growth rebounded in line with expectations in June.

Matthew Andrews

Contact Matthew Andrews