Pound Euro (GBP/EUR) Exchange Rate Stays Muted as Market Mood Grows Sombre
(Article updated 08:50, 5/4/23) The Pound Euro (GBP/EUR) exchange rate has begun today in narrow boundaries. A hesitant market mood is keeping the more risk-sensitive Sterling down.
Following yesterday’s US JOLTs jobs openings, jitters have resurfaced over signs of a cooling US economy. However, despite that pairing’s negative correlation, EUR appears unable to firmly capitalise on a softer ‘Greenback’.
Once again, the Pound is seeing a limited slew of data today. Because of this lack of clear drivers, GBP is largely trading against other currency’s strength and weakness.
At the time of writing, GBP/EUR is trading at around €1.1402, showing little change from the morning’s opening rates.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Narrows as Euro Buoyed by Weak US Dollar
(Article updated 16:39, 4/4/23) The Pound Euro exchange rate has trimmed its gains this afternoon. With the US Dollar sliding, the Euro is gaining ground due to the pairing’s negative correlation.
With both US factory orders and JOLTs job openings coming far below expectations, EUR investors are capitalising on the weakness.
For the Pound, a speech from Bank of England (BoE) Chief Economist Huw Pill appears to have inspired continued momentum.
Pill did call for caution, but implied that inflation may remain sticky. As such, rate hike bets may have crept upward, bring tailwinds for GBP.
At the time of writing, GBP/EUR is trading at around €1.1406, edging higher from the morning rates but now in more narrow boundaries.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Rises as EU Consumer Inflation Expectations Cool
The Pound Euro exchange rate is strengthening this morning, as Eurozone consumer inflation expectations fell in February.
At the time of writing, GBP/EUR is trading at around €1.1421, a rise of around 0.3% from the morning’s opening rates.
Euro (EUR) Muted amid Falling Consumer Inflation Expectations
The Euro (EUR) is lacking support this morning, as falling inflation expectations sap sentiment towards the single currency.
The European Central Bank (ECB) published the results from February’s consumer expectations survey. They found that inflation expectations had fallen further from January, down to 8.7% from 9.5%.
EUR investors appear to be expecting the ECB to take this as evidence that their tightening cycle is working. As such, rate hike bets may be declining, prompting muted trade in the common currency.
On the other hand, hawkish sentiments from ECB policymaker Robert Holzmann could be keeping this in check.
Holzmann stated:
‘I think we can afford another 50 basis points, and in particular, if no social agreement emerges to temper inflation we’ll have to do more to produce it.’
Elsewhere, the latest balance of trade figures from the blocs’ largest economy showed little change. Germany’s trade surplus remained at €16bn, far below predictions of an increase to €17bn. This may be contributing a further headwind for the Euro.
Pound (GBP) Rallies amid Upbeat Trade
The Pound (GBP) is benefitting from an upbeat market mood this morning, bringing tailwinds to the increasingly risk-sensitive currency.
With market jitters over the recent oil production cuts appearing to cool, trade is shifting to favour riskier assets.
Furthermore, GBP investors could be increasing their bets on further tightening. Currently, markets are pricing in an 18bps interest rate hike in May, followed by a further 41bps of hikes over the summer.
However, some economists are leaning towards a pause in hikes from the Bank of England (BoE). As such, Sterling’s gains may be being capped by the lack of consensus amongst investors.
GBP/EUR Exchange Rate Forecast: German Economic Cooldown to Weigh on EUR?
Looking ahead for the Euro, the core catalyst of movement may be tomorrow’s German factory orders data. The release covers activity in February, and is forecast by economists to show a cooldown.
If this prints accurately, the single currency could weaken due to the weakness shown in the bloc’s largest economy.
Furthermore, on Thursday the latest industrial production data from Germany is due on Thursday. February’s release is forecast to show a similar slump, which may exacerbate weakness in EUR rates.
For the Pound, the data calendar is slight over the next few days. As such, Sterling may be left vulnerable to external factors. As the more risk sensitive currency of the pairing, a sour market mood could weaken GBP/EUR.
Elsewhere, if the final UK service sector index deviates from preliminary readings, it may swing the currency. A surprise to the upside could buoy GBP.