Pound Euro Exchange Rate Trims Gains following Eurozone Consumer Confidence

Pound Euro (GBP/EUR) Exchange Rate Softens following Positive Eurozone Data

(Updated 16:40, 22/11/22) The Pound Euro (GBP/EUR) exchange rate slipped again this afternoon, trimming its gains, after Eurozone consumer confidence beat expectations.

Consumer morale in the bloc improved from -27.5 to -23.9 this month, much better than expectations of -26.

This better-than-forecast data boosted the Euro (EUR), allowing it to regain lost ground against the Pound (GBP).

At the time of writing, GBP/EUR is trading at around €1.1551, marginally higher than today’s opening rate.

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Pound Euro (GBP/EUR) Exchange Rate Regains the Upside

(Updated 14:15, 22/11/22) The Pound Euro (GBP/EUR) exchange rate has reversed its earlier losses to climb to a 19-day high. At the time of writing, GBP/EUR is trading at around €1.1573, up over 0.4% from today’s low of €1.1524.

The recovery in the Pound Euro pair comes amid an upbeat mood in markets, which is supporting the riskier Pound (GBP) over the safer Euro (EUR).

Meanwhile, rising gas prices could be troubling EUR investors. Surging gas prices have caused significant economic damage within the Eurozone, with the International Energy Agency warning that high prices and shortages could wreak havoc through to next year’s winter.

Gazprom – Russia’s state-backed energy giant – has threatened to cut gas supplies to Europe via Ukraine as early as next week. Europe is already facing a gas supply crunch after Russia ceased supplies through its main Nord Stream pipeline.

As for the Pound, some moderately upbeat UK news may be helping Sterling. Two strikes – one by West Midlands Metro workers and another at a supermarket food manufacturing facility – have been suspended, as union members considered improved pay offers. Huge waves of industrial action across multiple sectors have hurt the Pound in recent months, so today’s news could be prompting an upside.

In addition, UK mortgage rates are coming down. This is good news for homeowners, who may face less of a squeeze on incomes than previously feared. It’s also good news for the UK housing market, as higher mortgage rates may deter buyers.

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Pound Euro (GBP/EUR) Exchange Rate Choppy amid European Headwinds

The Pound Euro (GBP/EUR) exchange rate wavered this morning, heading lower overall, as investors remain anxious about the UK’s economic forecast.

At the time of writing, GBP/EUR is trading at around €1.1547, down marginally from an overnight high of €1.1555.

Pound (GBP) Stumbles despite Risk-On Mood

The Pound (GBP) was choppy against the Euro (EUR) this morning, as concerns about the UK’s economic outlook offset a risk-on market mood.

Sterling has become increasingly risk sensitive in recent months, and an upbeat mood in global markets today is offering the currency some support. Despite Russia-Ukraine worries and fears of a global economic downturn, equity markets are up.

However, persistent fears about the British economy are weighing on GBP investors’ minds. The UK looks set for a prolonged period of low growth, high taxes and elevated inflation.

In its latest half-yearly economic outlook, published today, the OECD warns that the UK will be the second weakest of the world’s largest economies next year. Only Russia – which has been heavily sanctioned – will contract more than the UK.

The OECD forecasts that the British economy will contract by 0.4% next year and grow only 0.2% in 2024, making it the weakest performer among the G7 group of nations over the next two years.

Euro (EUR) Subdued amid Eurozone Concerns

Meanwhile, the Euro is also rather mixed today, as there are concerns about the Eurozone economy too.

The OECD warned that, amid a global economic downturn, Europe would fare the worst due to its high exposure to Russia’s war in Ukraine.

The single currency is finding some support, however, thanks to its negative correlation to a weaker US Dollar (USD). With the safe-haven USD losing ground amid a risk-on market mood, EUR is catching some bids. This, in turn, has helped it post modest gains against the Pound.

Pound Euro Exchange Rate Forecast: Consumer Confidence to Support EUR?

Looking ahead, the Eurozone’s flash consumer confidence report for November is due out. Economists expect consumer morale to have improved slightly, which may give the single currency a modest boost. However, the confidence indicator is likely to remain close to September’s record low, so any upside may be limited.

As for Sterling, UK data is in short supply today, which could leave the Pound vulnerable to losses amid the ongoing worries about the British economy.

Tomorrow, the flash PMIs for November are out. Economists expect deepening contractions in both Eurozone and UK business activity, so we could see GBP/EUR wobble.

Samuel Birnie

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