Pound Euro Exchange Rate Buoyed as UK GDP Beats Forecasts
The Pound Euro (GBP/EUR) exchange rate is ticking higher this morning. A surprise expansion in UK GDP bolstering Sterling sentiment.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1865. Up roughly 0.3% from this morning’s opening rate.
Pound (GBP) Strengthens on Surprisingly Upbeat GDP Figures
The Pound (GBP) is off to a solid start this morning following the publication of the UK’s latest GDP figures.
According to data published by the Office for National Statistics (ONS) the UK economy expanded by 0.5% in May. Rising from an upwardly revised -0.2% in April and beating forecasts growth would stall.
The surprisingly strong growth figures have been welcomed by GBP investors this morning. May’s figures appearing to show economic activity in resilient in the face of a cost-of-living crisis.
The healthy acceleration of GDP will help to ease fears of a contraction of growth in the second quarter.
Victoria Scholar, head of investment at interactive investor, comments:
‘Amid fears of a recession, disappointing retail sales figures and record low consumer confidence data, this morning’s figures come as a welcome reprieve with this morning’s positive GDP figures allaying some growth concerns after April’s surprise negative reading.’
Most importantly the robust figures won’t dissuade the Bank of England (BoE) from taking its foot off the pedal when it comes to raising interest rates. The size of the expansion could even bolster the bank’s appetite for a 50bps rate hike in August.
Euro (EUR) Muted amid Recession Fears
The Euro (EUR) is subdued this morning. Fears of an impending Eurozone recession continue to take their toll on the single currency.
EUR investors are growing increasingly unnerved by the prospect of the bloc slipping into a recession.
This has seen the Euro face sustained selling pressure over the last week. Even plunging the single currency almost to parity with the US Dollar (USD).
Pound Euro Exchange Rate Forecast: UK Politics to Limit Additional Upside in Sterling?
The Pound Euro (GBP/EUR) exchange rate is likely to struggle to hold at its best levels. With Fresh UK political uncertainty likely to drag on Sterling sentiment.
As the race to replace Boris Johnson as Prime Minister gets properly underway, GBP investors will be seeking to gauge which ones may have the best chances of making it all the way.
This could lead to volatility in the Pound if the favoured candidate is viewed as being more antagonistic towards the EU or weak regarding the economy.
Meanwhile, the Euro is also likely to face an uphill battle amid ongoing concerns over European energy security. The single currency is poised to plunge if Russia shows any signs of cutting off European gas supplies for good.