Pound Euro (GBP/EUR) Exchange Rate to Face Mixed Movement?
The Pound Euro (GBP/EUR) exchange rate ticked lower this morning, despite UK GDP exceeding forecasts. However, with both currencies facing mixed data, there may be some volatility ahead.
At the time of writing, GBP/EUR is trading at around €1.1360, marginally down on its opening levels.
Pound (GBP) Slips despite Upbeat GDP
The Pound (GBP) stumbled against the Euro (EUR) this morning, despite upbeat UK economic news.
The final results for the UK’s fourth-quarter GDP growth rate showed that the British economy expanded 0.1% in the last three months of 2022, rather than stalling as expected. While also exceeding expectations, this data confirms that the country avoided a recession last year.
GDP is estimated to have grown by a revised 0.1% in Quarter 4 (Oct to Dec) 2022.
Up from an initial estimate of 0.0% growth.
➡️ https://t.co/Q7Lah5zn7G pic.twitter.com/SMEGkiNpOy
— Office for National Statistics (ONS) (@ONS) March 31, 2023
However, despite the better-than-expected economic performance last year, some analysts are still concerned that the UK may slip into recession.
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, said:
‘The upward revision to real GDP growth in Q3 and Q4 of last year suggests that high inflation took a slightly smaller toll on the economy than we previously thought. But with around two-thirds of the drag on real activity from higher rates yet to be felt, we still think the economy will slip into a recession this year.’
This downbeat outlook may be putting some pressure on Sterling today, with GBP slipping despite the positive GDP figures.
Euro (EUR) Firms following Eurozone CPI
Meanwhile, the Euro has managed to gain against the Pound, despite Eurozone inflation cooling more than forecast.
The bloc’s consumer price index showed that inflation eased from 8.5% in February to 6.9% in March, lower than forecasts of 7.1%.
However, core inflation ticked higher this month, from 5.6% to 5.7%, suggesting that price pressures remain sticky despite the recent rapid fall in energy costs.
With the rise in prices broadening and underlying inflation rising, the European Central Bank (ECB) may decide to raise interest rates higher at its next meeting. These rate hike bets seem to have given EUR a boost, although the larger drop in headline inflation may be capping gains.
Pound Euro Exchange Rate Forecast: GBP/EUR to Waver?
Looking ahead, the Pound Euro pair could fluctuate as the session unfolds. With both currencies facing rather mixed data, there may be some uncertain movement.
Later on, US data could impact GBP/EUR. The latest core PCE price index – the Federal Reserve’s preferred measure of inflation – is due out. If it shows that inflation continues to fall, a cheery market mood could lift the riskier Pound against the safer Euro.
Finally, ECB President Christine Lagarde is due to speak late afternoon. Any hawkish comments could boost EUR.