Pound Euro (GBP/EUR) Exchange Rate Rallies amid Upbeat Trade
(Article updated 16:24, 28/4/23) The Pound Euro (GBP/EUR) exchange rate is climbing this afternoon, as risk appetite returns to markets.
As the Pound is increasingly risk-sensitive, the cheery trade is elevating it above most peers. Meanwhile, the Euro is likely being weighed down by a sharper-than-expected cooldown in German inflation.
Furthermore, a lower-than-forecast GDP print may also be contributing to this. Because of this data, EUR investors may be considering how far the European Central Bank (ECB) has left to go in terms of tightening.
However, this GDP data could have contributed to the upbeat mood, as it showed that the Eurozone managed to avoid a recession.
Holger Schmieding, Chief Economist at Berenberg, commented:
‘The eurozone economy rode out a difficult winter without falling into stagnation or even recession. Despite sky-high energy prices for households and businesses caused by the Putin shock, real GDP expanded by a modest 0.1% quarter-on-quarter in the first quarter.’
At the time of writing, GBP/EUR is trading at around €1.1390, a rise of roughly 0.5% from the morning’s opening rates.
Original article continues below:
Pound Euro Exchange Rate Narrows as EU GDP Misses Forecasts
The Pound Euro exchange rate is trapped in narrow boundaries this morning, as EU GDP data prints below forecasts.
At the time of writing, GBP/EUR is trading at around €1.1333 showing little movement from the morning’s opening rates.
Euro (EUR) Undermined by GDP Slowdown
The Euro (EUR) is being undermined this morning, following the release of the latest GDP data for the Eurozone. First quarter growth was forecast to increase to 0.2% from 0%, but instead printed at 0.1%.
The data does suggest the bloc has managed to skirt a recession for the time being. However, the slow growth could be illustrating the impact the European Central Bank’s (ECB) rate hikes are having. With this in mind, investors may be leaning towards a smaller hike at the ECB’s May meeting.
Furthermore, a downbeat GDP print from Germany could be weighing on the common currency. The German economy, the bloc’s largest, stagnated during Q1.
The wider outlook remains downbeat. Carsten Brzeski, Global Head of Macro at ING, commented:
‘Even though early GDP estimates have become subject to unusually strong revisions and we could still see some upward revision, the overall direction for the German economy is clear: this year will bring a long flirtation with stagnation.’
With inflationary pressures also appearing to ease, it seems as if a hold could now be on the cards for the ECB later in the year.
However, due to the current market mood, the Euro is able to gain some ground against risk-sensitive currencies.
Pound (GBP) Lacks Direction amid Bereft Data Calendar
The Pound (GBP) is lacking clear direction this morning, as a lack of data leaves GBP investors with little to work with.
Due to GBP holding an increasingly risk-sensitive side, the morning’s tepid market mood is preventing clear gains.
However, business confidence in the UK appears to be edging higher, which could be bringing some cushioning. Improved relations between the UK and EU could be the cause.
As the focus for investors today lies in European and American data, GBP may continue to trade in narrow boundaries today.
GBP/EUR Exchange Rate Forecast: German CPI Data in Focus
Later this afternoon, the Euro could see further movement from the release of the latest German inflation data. As the bloc’s largest economy, the release could be seen as a sign of where inflation is heading in the Eurozone.
Headline inflation is forecast to cool slightly from 7.4% to 7.3%, which could weigh on the single currency. However, as it could point to sticky inflation, it may increase bets on further tightening from the European Central Bank. Elevated bets would likely bring support to the common currency.
Meanwhile, through to the beginning of early next week, the Pound is due to see little in the way of economic releases. Because of this, it may remain vulnerable to external factors such as shifts in the market mood.
As Sterling holds an increasingly risk-sensitive nature, if the market mood sours it may weaken against safer currencies.