Pound Euro (GBP/EUR) Exchange Rate Boosted by Risk-On Market Mood

Pound Euro (GBP/EUR) Exchange Rate Strengthens as Risk Appetite Continues

The Pound Euro (GBP/EUR) exchange rate is buoyant this morning, as risk-on trade dominates the markets.

At the time of writing, GBP/EUR is trading at around €1.1643, an increase of roughly 0.5% from the morning’s opening rates.

Pound (GBP) Rallies despite Bleak Economic Outlook

The Pound (GBP) is rallying this morning, as risk appetite improves across markets following the Federal Reserve’s dovish pivot. Tumbling house prices and a pessimistic outlook may be placing a small cap on these gains, however.

This morning, Nationwide Building Society reported a 1.4% slide in house prices during November, the fastest fall in 18 months. Former Chancellor Kwasi Kwarteng’s disastrous mini-budget has wounded the UK housing market, with prospective buyers remaining wary.

Peter Brodnicki, the CEO of MAB explored the sentiment among buyers further. He stated:

‘The consequences of the so-called mini-budget have been quick and far-reaching. The sudden and unexpected pace of mortgage rate increases, combined with the tightening of mortgage lending criteria, have resulted in some customers pausing both home-moving and re-financing plans.’

Elsewhere, the UK’s manufacturing sector remained a focus for analysts. UK manufacturers have highlighted contractions in output, new orders and employment in November.

Because of this, the UK’s economic outlook continues to darken, with Sterling’s increasingly risk-sensitive nature allowing some gains.

Euro (EUR) Mixed as Manufacturing PMI Cooler-Than-Expected

The Euro (EUR) is seeing mixed trade today, as the bloc’s final manufacturing index came in below forecasts.

Expected to print at 47.3, the final index printed at 47.1. While still demonstrating an improvement over October’s manufacturing index, the downtick has prompted caution among investors.

Yet, analysts are viewing the news as a welcome sign that manufacturing downturn is beginning to ease in the bloc.

S&P Global Chief Business Economist Chris Williamson examined this, noting that the indexes showed the sector was at decade-level lows. He stated:

‘The PMI signals some welcome moderation in the intensity of the eurozone manufacturing downturn in November, which will support hopes that the region may not be facing a winter downturn as severe as previously anticipated by many.’

Similarly, Eurozone unemployment was seen to have hit another record low. By falling from 6.6% to 6.5%, the figure exceeded forecasts and brought tailwinds to the single currency.

However, further serving to limit the Euro today is a further-than-expected drop in German retail sales. The bloc’s largest economy was expected to see a fall of 0.4% in sales, whereas the data printed at -2.8% for October. This prompted fears that the Eurozone may follow suit, as the cost-of-living crisis continues to impact people across the globe.

Pound Euro (GBP/EUR) Exchange Rate Outlook: European Data to Boost Euro?

Looking ahead for the Euro, a raft of data is expected tomorrow morning from Germany, France and Spain. The German balance of trade is expected to show an uptick in surplus, with French industrial production expected to improve. Spanish employment figures are expected to show an increase in employment.

With the data painting the picture of a modestly improving economic outlook for the bloc, the Euro may see support.

For the Pound, domestic news is likely to be the key focus for investors due to the lack of upcoming data releases. Any further information on how the recession and cost-of-living crisis is affecting the UK may weaken Sterling.

John Mulcahey

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