Pound Euro Exchange Rate Fluctuates amid Tempered ECB Rate Hike Bets
The Pound Euro (GBP/EUR) exchange rate is trading erratically this morning in the wake of softer-than-expected German inflation data.
At time of writing the GBP/EUR exchange rate is trading around €1.1278, relatively unchanged from this morning’s opening levels.
Euro (EUR) Undermined by Softening German Inflation
The Euro is coming under pressure this morning after annualised inflation data for Germany printed lower than expected.
Despite edging higher from a four-month low of 8.6%, CPI climbed to 8.7% in January. Against expectations of an 8.9% rise, European Central Bank (ECB) rate hike bets could be dented.
However, the prospect of the central bank to continue its aggressive tightening policy is keeping the single currency buoyed. ECB policymaker Klaas Knot said yesterday that the ECB will continue its path, and that jumbo rate hikes will not end in March. Knot added:
‘And if underlying inflation pressures do not materially abate, maintaining the current pace of hikes into May could well remain warranted.’
Pound (GBP) Under Pressure from Dovish BoE Fears
Meanwhile, the Pound is trading without a clear direction this morning in the absence of major economic data.
However, growing expectations of the Bank of England (BoE) nearing the end of their rate-hiking cycle could be sapping demand. With BoE Governor Andrew Bailey commenting that inflation is set to fall rapidly in the second half of 2023, the central bank’s dovish tone could be concerning investors.
Elsewhere, GBP investors will be closely monitoring the testimony at the House of Commons Treasury Select Committee. BoE Governor Andrew Bailey and other MPC members will be under scrutiny today over their last interest rate decision. Any further hints or comments on the central bank’s future movements could influence the Pound.
Pound Euro Forecast: Underwhelming GDP Growth to Sink Sterling?
Looking ahead, the Pound Euro exchange rate could see further movement with the GDP growth data for the UK tomorrow. Expected downbeat expectations could exert further pressure on the Pound, as the economy is expected to have stagnated QoQ and fell MoM.
Meanwhile, the Euro could see a resurgence with a speech from ECB Vice President Luis de Guindos this evening. Hawkish comments on the central bank’s monetary policy going forward could provide a boost for the Euro.