Pound Euro (GBP/EUR) Exchange Rate Trends Sideways Following US Inflation Data
(Updated 13:55 23/12/22)
The Pound Euro (GBP/EUR) exchange rate shed its gains as the day went on. The curreny pair is now trading within a narrow range. A weaker US Dollar (USD) potentially pulled the exchange rate lower today.
At time of writing the GBP/EUR exchange rate is at around €1.1350, virtually unchanged from this morning’s opening figures.
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Pound Euro (GBP/EUR) Exchange Rate Underpinned by Healthy Risk Appetite
The Pound Euro (GBP/EUR) exchange rate is edging higher today. A risk-on market mood is likely helping the currency pair to climb.
Recession fears and UK industrial action could be limiting gains for GBP/EUR, however. A hawkish stance from European Central Bank (ECB) officials may also be keeping pressure on the exchange rate.
At time of writing the GBP/EUR exchange rate is at around €1.1381, which is up roughly 0.2% from this morning’s opening figures.
Pound (GBP) Firms Despite Recession Fears
The Pound (GBP) is firming today amid a healthy risk appetite. A lack of significant data today ahead of the Christmas period is preventing any drastic bets on Sterling, however.
Further industrial action across the UK may also be weighing on the currency today. Border Force staff at multiple UK airports have begun a wave of strike action today that could lead to delays for passengers entering the country. Royal Mail and rail sector staff are also striking today.
The increased possibility of a 2023 recession for the UK may also be capping the currency’s gains today. Markets are likely continuing to digest Thursday’s poor third quarter GDP figures.
The final reading of the data was revised lower, signalling a sharper-than-expected contraction in the UK’s economy. Experts stated that the figures all but confirmed a 2023 recession for the country.
Euro (EUR) Edges Lower amid Risk-On Mood
The Euro (EUR) is slipping today as a return of global risk appetite weighs on the single currency. The potential for further intensification in the Russia-Ukraine conflict may also be pulling EUR lower.
Confirmation that the US would be supplying Ukraine with the Patriot air defence system has led to concerns of further escalation by Russian forces.
The missile system is aimed at protecting Ukraine’s civilian population centres against drone and missile strikes. Russian President Vladimir Putin dismissed the advanced missile system as ‘quite old’ in statement to reporters in Moscow.
Hawkish comments from European Central Bank (ECB) officials could be continuing to limit losses for the Euro, however. ECB Vice-President Luis de Guindos recently signalled that further interest rate hikes from the central bank would be necessary.
Speaking in an interview publish in French newspaper Le Monde on Thursday, Guindos said:
‘Increases of 50 basis points may become the new norm in the near term. We should expect to raise interest rates at this pace for a period of time.’
GBP/EUR Exchange Rate Forecast: Will UK House Price Data Weigh On GBP?
Looking to the week ahead, data will be limited for both currencies due to the festive period and bank holidays in the UK.
For the Pound, the latest data for the UK housing market could prompt movement in the currency on Thursday. Following the UK’s poorly-received mini budget, mortgage approvals slumped in October as buyers struggled with soaring rates.
A forecast slip in December’s house price figures on Friday could limit any gains for Stelring if they print as forecast, however.
Further industrial action across the UK could also limit demand for the Pound in the coming week.
The Euro will see no significant data releases over the coming week. Due to this, the single currency may be affected by shifts in risk appetite and further developments in the Russia-Ukraine conflict.
ECB rate hike bets could underpin the Euro, however. ECB policymakers have remained hawkish since the central bank’s last interest rate hike.