Pound Euro (GBP/EUR) Remains Choppy Ahead of Key Interest Rate Decisions
The Pound Euro (GBP/EUR) exchange rate is trading erratically this morning as UK house prices plummet, highlighting a cooling market. Meanwhile, the markets brace for next week’s highly-anticipated central bank meetings.
At time of writing, the GBP/EUR exchange rate is around €1.1576, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined by Falling House Prices
The Pound (GBP) is struggling for much demand this morning as the housing market is still feeling the effects of the disastrous mini-budget.
Average house prices in the UK tumbled 2.3% in November, the biggest drop since the financial crisis of 2008. Rising mortgage rates has made buying a house unaffordable for many and has put off first-time buyers and movers. The ensuing market volatility that followed the mini-budget in September, the housing market was hit particularly hard. Karen Noye, mortgage expert at Quilter, commented on the impact the mini-budget had on mortgage lenders and the housing market:
‘This brought an abrupt end to what has been a long era of cheap money for property purchases. Increased rates, sky high inflation and general uncertainty will quickly put lots of potential first-time buyers and movers off, reducing demand and house prices with it.’
Euro (EUR) Buoyed by Positive German Data
Meanwhile, the Euro (EUR) is enjoying a second day of better-than-expected German economic data. With factory orders printing better than expected, today’s industrial production also ticked higher than anticipated. Despite industrial production in Europe’s largest economy remaining in contraction territory, a 0.1% fall came in better than an expected 0.6% decline.
Elsewhere, lending considerable support to the global market sentiment, is further positive news out of China. Following reports of easing lockdowns and Covid restrictions, Chinese authorities announced positive cases with mild symptoms are allowed to quarantine from home for seven days. Mass PCR testing will also be scrapped. As China pulls further away from their zero-Covid stance, the economic pressures that have hounded the economy will finally ease.
Pound Euro Exchange Rate Forecast: Eurozone GDP to Lift the Euro?
Looking ahead, the Pound Euro exchange rate could see further movement with the release of the Q3 3rd estimate of GDP growth. An expected 0.2% expansion is unlikely to sway movement, but any deviation could. However, the report is also expected to include further details on the drivers of GDP growth. Any indicators on how the labour market is performing could inspire movement.
Meanwhile, the Pound continues to operate on a thin trading calendar. A speech from Bank of England (BoE) member Phil Evans is unlikely to have much impact on Sterling as he is not a member of the MPC. Domestic issues and market sentiment will remain to be the main driver for the Pound.