Pound Euro (GBP/EUR) Exchange Rate Trends Sideways amid Volatile Market Mood
(Updated 16:35 17/03/23)
The Pound Euro (GBP/EUR) exchange rate regained some lost ground over the course of the day. The pairing is now trading within a narrow range.
Cooler Eurozone inflation may be lending support to the exchange rate today. February’s headline inflation eased to 8.5% due to a large fall in energy prices. Further volatility in the European banking sector also helped the pairing to edge higher.
On the other hand, core inflation continued to climb amid soaring food and fuel prices. This may be capping GBP/EUR’s gains amid increased ECB rate hike bets.
At time of writing the GBP/EUR exchange rate is at around €1.1407, whch is virtually unchanged from this morning’s figures.
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Pound Euro (GBP/EUR) Exchange Rate Firms despite Risk-On Mood
The Pound Euro (GBP/EUR) exchange rate is edging lower today. Hawkish sentiments from European Central Bank (ECB) officials may be weighing on the pairing today.
On the other hand, GBP/EUR may be seeing its losses limited by a risk-on mood.
At time of writing the GBP/EUR exchange rate is at around €1.1390, which is down roughly 0.2% from this morning’s opening figures.
Euro (EUR) Bolstered by Hawkish ECB Comments Following Rate Hike
The Euro (EUR) is gaining today. The single currency may be benefitting from a weaker US Dollar (USD).
Hawkish comments from multiple European Central Bank (ECB) officials may also be lending support to EUR. The rhetoric comes after the ECB hiked interest rates by 50bps on Thursday.
Speaking today, ECB policymaker Peter Kazimir signalled that the central bank was not ‘at the finish line’ in regards to rate hikes.
Additionally, board member Gediminas Simkus said:
‘I still believe that yesterday was not the last rate hike.’
The Euro may be seeing its gains capped by more cautious assessment from the markets, however. Goldman Sachs downgraded its rate hike forecast for the ECB today. The investment bank now predicts a 25bps hike from the central bank in May.
The continued instability in the European banking sector may also be keeping pressure on the Euro today.
Pound (GBP) Mixed amid Return of Risk Appetite
The Pound (GBP) is slipping against its riskier peers today amid a return of global risk appetite. The risk-on mood is helping Sterling to gain against some of its safer peers, however.
GBP may be seeing its losses limited by a pickup in bets on further interest rate hikes from the Bank of England (BoE). Following the ECB’s interest rate hike on Wednesday, markets are now anticipating a 25bps from the BoE next week.
ING analysts Francesco Pesole, Frantisek Taborsky, and Chris Turner said:
‘Our base case is a hike, although it’s admittedly a close call as we acknowledge it will depend on financial market developments and CPI numbers next week. The BoE is probably more relaxed than the ECB and the Fed, so the bar for pausing is lower.’
GBP/EUR) Exchange Rate Forecast: Will BoE Signal Policy Tightening Slowdown?
Looking to the week ahead for GBP, February’s inflation data could weigh on the Pound on Wednesday if it eases to 9.9% as forecast.
The BoE’s interest rate decision on Thursday could cause additional shifts in the Pound. The forecast 25bps rate hike has largely been priced in by markets so may have little effect on GBP. Signals from the BoE that they will be pausing policy tightening could pull Sterling lower.
February’s retail sales are expected to rise for a second consecutive month on Friday. The data could bolster confidence in the UK’s economy and push GBP higher
Also on Friday, evidence of a downturn in the UK’s private sectors could weigh on Sterling if the figures print as forecast. March’s PMIs are all expected to ease from the previous month’s readings.
In the coming week for EUR, a forecast drastic widening in the trading bloc’s trade deficit could pull EUR lower. January’s deficit is expected to widen to €-28.5bn on Monday.
The latest Eurozone PMIs could have a mixed effect on the single currency on Friday. On the one hand, the bloc’s manufacturing sector is forecast to have remained in negative territory on March. This could cause losses in EUR.
On the other hand, another positive reading of the Eurozone’s services sector PMI could lent support to the Euro.