Pound Euro (GBP/EUR) Exchange Rate Fluctuates, Trending Up Overall
(Updated 16:30, 25/8/22) The Pound Euro (GBP/EUR) exchange rate experienced some volatility today, though gained ground overall, as investors reacted to the latest data releases.
After mixed Eurozone data this morning saw GBP/EUR wobble, some positive UK data helped lift the Pound (GBP). The Confederation of British Industry’s (CBI) distributive trades survey massively beat forecasts, rising from -4 to 37, rather than dropping to -7. While the CBI data isn’t usually as impactful as other releases, UK data has been thin on the ground this week and the survey seemed to give GBP a boost.
The meeting minutes from the European Central Bank (ECB) then gave the Euro (EUR) some support. The accounts showed that the majority of policymakers supported a 50-bp rate rise at the bank’s last meeting, prompting markets to bet on another half-point hike when the ECB convenes in two weeks’ time. This trimmed GBP/EUR’s gains.
However, Europe’s ongoing energy crisis hung over both currencies. Gas prices in Europe continued to rise today, but with EU gas prices rising at a faster pace than UK prices, GBP seemed to have the edge.
At the time of writing, GBP/EUR is trading at €1.185, almost 0.2% up from today’s lowest levels.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Choppy as German Data Comes with Caveats
The Pound Euro (GBP/EUR) exchange rate wavered this morning following mixed data from Germany, Europe’s largest economy.
At the time of writing GBP/EUR is trading at €1.1841, up from an earlier low of €1.1816.
Pound (GBP) Subdued amid UK Cost-of-Living Crisis
The Pound (GBP) is muted this morning as a lack of UK economic data leaves GBP investors to mull the country’s dire economic situation.
Energy bills are set to surge over the coming months, while some forecasters see inflation climbing to 18.6%. Meanwhile, wage growth lags behind, eroding household incomes and sparking strikes across the country.
As the UK hurtles towards an economic ‘catastrophe’, business leaders, charities, unions and economists are all calling for radical action from the government.
The British Chambers of Commerce (BCC) has put forward a five-point plan to protect UK firms from rising costs. Within the plan, the BCC calls for Covid-style support from the government.
Meanwhile, the head of Scottish Power has proposed a plan to freeze energy bills for two years; the Child Poverty Action Group (CPAG) has called for a cost-of-living support boost for low-income families; and the Resolution Foundation thinktank argues that radical policy action is needed.
A living standards catastrophe is coming this winter unless significant extra support is provided. Low-income households could find themselves spending £1 of every £7 they spend on energy bills alone. https://t.co/FqG8uD2iyg pic.twitter.com/YGpkK5Jto4
— Resolution Foundation (@resfoundation) August 25, 2022
Despite these fears, the Pound has wavered higher against a weaker Euro (EUR) so far today. GBP investors may be hopeful that the government will succumb to mounting pressure and bring in significantly more support.
Whatever is lifting GBP/EUR today, the strength may be short-lived.
Euro (EUR) Fluctuates on Mixed German Data
The Euro wobbled this morning following the latest data from Germany, slipping overall against its stronger peers.
Germany’s final GDP growth rate for the second quarter of this year beat previous estimates. Rather than stalling, Europe’s largest economy grew by 0.1% from April to June.
In addition, the German Ifo business climate indicator also exceeded forecasts. The score edged down from 88.7 to 88.5, above expectations of a drop to 86.8.
Although these reports were better than anticipated, Ifo economist Klaus Wohlrabe warned that ‘a recession is still on the cards.’ The Ifo expects the German economy to shrink 0.5% in the third quarter of this year.
Amid these mixed data releases, EUR wavered.
Pound Euro Exchange Rate Forecast: GBP/EUR to Fluctuate amid Eventful Day
GBP/EUR will likely see more fluctuations today as a number of events could impact the pair.
For the Pound, the latest retail sales report from the Confederation of British Industry (CBI) could add to economic fears. Forecasters expect sales volumes to have declined for the fifth consecutive month, and this could hurt GBP.
Meanwhile, domestic UK news will likely continue to affect Sterling. If government, or the two Conservative contestants for Prime Minister – Liz Truss and Rishi Sunak – continue resisting calls for significant fiscal stimulus, GBP could slip.
EUR investors will be focused on the latest meeting minutes from the European Central Bank (ECB). Any signs that policymakers support further steep interest rate rises could boost the single currency. However, markets remain worried that, with a Eurozone recession looming, the ECB may not be able to hike as swiftly or steeply as it would like.
Later in the day, the Euro could trade on its negative correlation to the US Dollar (USD). If downbeat US data dampens Federal Reserve rate rise bets then EUR could climb.