GBP/EUR Exchange Rate Rangebound as UK CPI Marginally Increases in June
The Pound to Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently trading around €1.102.
Sterling held steady against the Euro (EUR) today after the UK’s Consumer Price Index for June beat forecasts and rose from 0.5% to 0.6%. As a result, GBP investors are becoming more optimistic that the British economy could be on the road to recovery.
Samuel Tombs, an analyst at Pantheon Economics, was measured in his response, predicting that the CPI could fall back:
‘The small rise in CPI inflation in June is nothing to worry about. It was driven by the volatile computer games component. We still expect the headline rate to fall a bit further in Q3. The data won’t stand in the way of the MPC doing more to stimulate the economy later this year.’
Meanwhile, Capital Economics has predicted that the Government’s temporary discount on meals at restaurants, pubs, and cafes would pull down inflation below zero in the coming months.
Euro (EUR) Steady Despite Fears Over EU Unity
The Euro (EUR) steadied against the Pound (GBP) this morning over growing fears for cohesion in the Eurozone. This follows comments from the European Commissioner for Economy Paolo Gentiloni, who said that the Covid-19 crisis could tear apart the European Union.
Mr Gentiloni commented:
‘The latest economic data are a warning; the recession is becoming deeper than expected and the countries in the euro area are moving even further away from each other economically than forecast in spring.’
‘What we have always warned against is now confirmed: the COVID recession threatens to tear the eurozone apart.’
As a result, EUR investors have become increasingly jittery on fears that tensions could mount in the bloc and further jeopardise unity across the Euro-area.
With no notable Eurozone economic data due to be released today, EUR investors will be keeping a close eye on global economic developments. Any worsening of risk-appetite could boost the safe-haven single currency.
GBP/EUR Forecast: Could Underwhelming UK Economic Data Sink the Pound?
Pound (GBP) investors will be awaiting tomorrow’s release of the UK’s ILO Unemployment Rate for May. If this confirms consensus and rises by 4.2%, then we could see Sterling suffer.
The European Central Bank (ECB) is expected to hold its interest rates at 0% tomorrow. Any dovish commentary from the ECB would prove EUR-negative.
Tomorrow will also see the release of the Eurozone’s trade balance data for May. If exports edge higher-than-expected, we could see the Euro benefit.
The GBP/EUR exchange rate could begin to fall this week if the UK’s economic performance continues to underwhelm.