Pound Euro (GBP/EUR) Exchange Rate Flat as Investors Digest UK GDP
(Updated 15:00, 12/8/21) The Pound Euro (GBP/EUR) exchange rate remains locked in a narrow trading pattern this afternoon as investors continue to digest the UK’s latest GDP figures.
Whilst the UK has so far experienced the largest expansion of growth of any G7 nation in the second quarter, Sterling has weakened as economists caution that the country’s recovery is ‘still lagging’ behind its peers as it is still 4.4% smaller than its pre-pandemic levels.
At the same time, the Euro is facing headwinds this afternoon as the US Dollar (USD) continues to rebound, limiting the downside in the GBP/EUR exchange rate.
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Pound Euro Exchange Rate Flat in Wake of Q2 UK GDP Figures
The Pound Euro (GBP/EUR) exchange rate is mostly rangebound so far this morning as markets digest some mixed UK macro data.
At the time of writing the Pound Euro exchange rate is trading at around €1.1804, virtually unchanged from this morning’s opening rate.
Pound (GBP) Muted despite Positive GDP
The Pound (GBP) is trading in a narrow range this morning, following the release of a slew of UK economic data, including the latest quarter GDP estimate.
According to data published by the Office for National Statistics (ONS), the UK economy expanded by 4.8% in the second quarter, rebounding from a 1.6% contraction at the start of the year.
Unsurprisingly this rebound in growth was driven by the reopening of more of the UK economy in the three months to June, with strong contributions from the hospitality industry, with indoor venues able to serve customers for the first time in almost half a year.
While GBP investors welcomed the robust GDP release, some of this morning’s accompanying data appearing to be limiting the upside potential of the Pound today.
GBP sentiment appears to have been particularly stifled by and underwhelming UK business investment print, with investment only climbing only 2.4% in Q2, versus expectations it would rise 10% or more.
Tom Pugh, UK economist at consulting firm RSM, comments:
‘Business investment only rose by a relatively meagre 2.4% QoQ. Businesses may have been deterred from investing in Q2 by the very uncertain outlook, but lacklustre business investment is a key indicator of how much long-term economic damage there will be from the pandemic’
Euro (EUR) Muted on Lacklustre Industrial Production Release
At the same time, the Euro (EUR) is also struggling to find any meaningful gains this morning in the wake of the Eurozone’s latest industrial production release.
The European statistics agency, Eurostat reported that industrial production contracted a further 0.3% in June, up from a 1.1% slump in May, but missing forecasts for a modest 0.2% decline.
Alongside an attempted recovery by the US Dollar (USD) this morning, demand for the Euro is likely to be limited today.
Pound Euro Exchange Rate Forecast: Positive Coronavirus Headlines to Buoy Sterling?
Looking ahead to the end of the week, in the absence of any notable data releases, movement in the Pound Euro (GBP/EUR) exchange rate may be dictated by coronavirus developments.
In the UK, the apparent slowing of new cases over the past week is likely to reflect positively on the GBP/EUR exchange rate.
Also likely to buoy Sterling sentiment is the confirmation from health secretary, Sajid Javid, that fully vaccinated people in England will no longer be legally required to self-isolate after coming into contact with a positive coronavirus cases.
The rule change will come into effect from Monday and should bring an end to the ‘pingdemic’, which has undermined the UK’s economic reopening over the past month by forcing millions of workers to self-isolate.
Meanwhile, the improving outlook in Europe, thanks to the EU’s vaccine rollout may also offer some support to the Euro.