Pound Euro (GBP/EUR) Exchange Rate Climbs Despite Positive German Data
(Updated 16:47 28/10/22)
The Pound Euro (GBP/EUR) exchange rate climbed reversed fortunes to firm today. The currency pair made gains towards the end of the day with no clear motivation.
On the other hand, positive data from Germany, the Eurozone’s largest member, may have caped gains for GBP/EUR today. The German economy expanded unexpectedly in the year’s third quarter. Additionally, German inflation in October rose by more than forecast which could have increased bets on aggressive action from the European Central Bank (ECB).
At time of writing the GBP/EUR exchange rate is at around €1.1647, which is up roughly 0.4% from this morning’s opening figures.
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Pound Euro (GBP/EUR) Exchange Rate Drops amid Reduced BoE Bets
The Pound Euro (GBP/EUR) exchange rate is slipping today. Expectations of a more cautious rate hike from the Bank of England (BoE) are likely weighing on the currency pair. Positive German data may also be pushing the pair lower.
GBP/EUR could be underpinned by speculation of a slower path of policy tightening from the European Central Bank (ECB), however.
At time of writing the GBP/EUR exchange rate is at around €1.1577, which is down roughly 0.2% from the morning’s opening figures.
Pound (GBP) Muted as Markets Increase Bets on Below-Forecast BoE Rate Hike
The Pound (GBP) is seeing subdued movements today. The muted movements are potentially due to investors limiting bets ahead of next week’s interest rate decision from the BoE.
A poll of economists by Reuters earlier in the week found 18 of 30 surveyed agreeing that the BoE would hike rates by 0.75%. Markets are now increasing bets on a below-forecast rate hike however, which may be weighing on the Pound.
The delay of the UK’s autumn statement until 7 November also added to the uncertainty around the BoE’s decision.
Instability in the Northern Ireland parliament may also be weighing on GBP today. After the Democratic Union Party (DUP) blocked attempts to break the deadlock, the country now faces a snap election.
Euro (EUR) Bolstered by Surprise German Economy Expansion
The Euro is edging higher today, although making limited progress against the Pound. Better-than-forecast data releases from Germany, the trading bloc’s largest member, are likely lending support to EUR. A risk-off market mood may also be bolstering the single currency today.
Data released today showed the Germany economy unexpectedly expanding in the third quarter of 2022. The country’s economy had been forecast to contract by 0.2%, but instead grew by 0.3%.
On the other hand, expectations that the ECB is set to slow its pace of policy tightening may cap gains for EUR.
Speaking today, ECB policymaker Francois Villeroy de Galhau signalled that future rate hikes would be as drastic as Thursday’s 0.75%.
GBP/EUR Exchange Rate Forecast: Will Eurozone Economy Stagnate as Forecast?
Looking ahead for the Euro, an uptick in German inflation later today could push the single currency higher. The rise could prompt bets on more aggressive future interest rate hikes from the ECB.
For next week, key Eurozone economic data on Monday could weigh heavily on EUR. The trading bloc’s economy is forecast to have stagnated in the third quarter of the year. Additionally, a slip in October’s inflation could see investors pare back ECB rate hike bets.
Thursday’s employment data could have the opposite effect on the single currency, however. September’s unemployment rate is expected to remain unchanged at record-lows for the third consecutive month. The evidence of a tight labour market could see the Euro climb amid speculation of greater ECB rate hikes.
Next week for the Pound, investors will be most closely focused on Thursday’s interest rate decision from the Bank of England. The decision could have a mixed effect on Sterling, with markets having largely priced in the forecast hike 0.75%. If the central bank maintains a hawkish stance in it’s press conference following the announcement, then it could lend support to GBP.
Also on Thursday, the final reading of October’s services sector PMI could pull GBP lower if it prints as forecast. The UK’s dominant private sector is expected to show a sharp decline in output.