Pound Euro (GBP/EUR) Fluctuates amid Uncertain 2023 Outlook
The Pound Euro (GBP/EUR) exchange rate is trading erratically this morning as political and economic uncertainty weighed on the UK housing market. The outlook for 2023 is equally as uncertain as the cost-of-living crisis rumbles on.
At time of writing, the GBP/EUR exchange rate is around €1.1300, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined by Faltering Housing Market
The Pound (GBP) continues its struggle this morning, as the UK’s largest house builder Barratt warns of a ‘marked slowdown’ in the housing market.
With mortgage approvals tumbling, and prices declining, the outlook for the next six months is uncertain. Barratt has already frozen hiring and has scrapped proposals for over 3000 plots. Investors and market experts are expecting further slumps in the sector, impacting the economy. David Thomas, Chief Executive of Barratt, commented:
‘Political and economic uncertainty impacted the first quarter; this was then compounded by rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence and reservation activity through the second quarter.’
Meanwhile, industrial action is expected to ramp up in the wake of the government’s controversial ‘anti-strike’ bill. Unions across the country are coordinating a ‘day of action’ of synchronised walkouts or rallies. Sharon Graham, leader of Unite, commented on the government’s anti-strike proposal:
‘Another dangerous gimmick from a government that should be negotiating to resolve the current crisis they have caused.’
Euro (EUR) Listless amid Mixed ECB Messages
Meanwhile, the Euro (EUR) failed to move in a clear direction as mixed messages from the European Central Bank (ECB) did little to inspire ERU investors.
Yesterday saw ECB Governing Council member Isabel Schnabel commented that further interest rate hikes were necessary, to bring inflation down. She also said that a maintained restrictive monetary policy would greatly benefit society by restoring price stability. However, ECB Governing member Mario Centeno poured water on that fire as he talked about how the current rate hike cycle was coming to an end.
Elsewhere, the Ukraine conflict continues to weigh on the Euro amid relentless fighting. Reports of the town of Soledar in the Donetsk region being captured by Russia have been disputed by Ukraine. Further news of the West supplying Ukraine with tanks continues to gather pace. Fears of the conflict escalating is likely to keep a lid on any gains for the Euro.
Pound Euro Exchange Rate Forecast: Shrinking UK Economy to Sink Sterling?
Looking ahead, the Pound Euro exchange rate could see further movement if GDP growth data for the UK prints to forecasts. An expected 0.2% decline could see the Pound slide after October’s 0.5% expansion.
Meanwhile, a lack of economic data for the Euro could see investors turn to US inflation data released tomorrow. The negative correlation the Euro shares with the ‘Greenback’ could support the shared currency. An expected softening of consumer price inflation could see Federal Reserve rate hike expectations pared, boosting the Euro.