Pound Euro (GBP/EUR) Exchange Rate Rises amid Upbeat Trade

Pound Euro (GBP/EUR) Exchange Rate Strengthens amid Upbeat Trade

(Article updated 16:26, 5/5/23) The Pound Euro (GBP/EUR) exchange rate is strengthening this afternoon amid a cheery market mood.

Following the release of the latest US non farm payroll data, which printed far above forecasts and showed a sharp increase in jobs created, investors appear jubilant.

The release indicates that the world’s largest economy is in a healthy state, prompting investors to opt for riskier investments.

As the Pound (GBP) holds an increasingly risk-sensitive nature, it is gaining ground against safer peers such as the Euro.

Furthermore, the Euro is being undermined by the upbeat US data due to its negative correlation to the ‘Greenback’.

At the time of writing, GBP/EUR is trading at around €1.1462, a rise of roughly 0.4% from the morning’s opening rates.

Original article continues below:

Pound Euro Exchange Rate Ticks Up amid German Factory Slump

The Pound Euro exchange rate is ticking upward this morning, as downbeat German economic data undermines the Euro.

At the time of writing, GBP/EUR is trading at around €1.1436, firming by roughly 0.2% from the morning’s opening rates.

Euro (EUR) Wavers as Hawkish ECB Rhetoric Proves Uninspiring

The Euro (EUR) is wavering this morning, as hawkish comments from European Central Bank (ECB) policymakers underpins the currency.

ECB Governing Council Member Francois Villeroy de Galhau indicated that future interest rate hikes were coming. In doing so, he added fuel to market thinking that at least another hike in June was on the cards.

However, this sentiment is being muddied by a shock slump in German factory orders. March’s records indicated a fall of 10.7%, significantly beyond forecasts of a 2.2% fall. This reflects the largest slump in output since the Covid-19 pandemic’s peak in 2020.

Joerg Kraemer, Chief Economist at Commerzbank, commented:

‘After three increases in a row, new orders literally collapsed in March, thus resumed their downward trend. Increasing risks for the export-oriented German industry come from the global interest rate hikes.’

Due to the conflicting views, the single currency is struggling to find clear direction in early trade. Furthermore, a mildly upbeat market mood could be limiting movement. As a safer currency, the Euro is unlikely to gain ground on risk-focused bets.

Pound (GBP) Enjoys Modest Support despite Dearth of Data

The Pound (GBP) is seeing some support this morning, despite a lack of clear data drivers. Continued bets on further tightening from the Bank of England (BoE) could be the cause of this.

Widely expected to deliver a 25bps rate hike next week, the BoE are under continued pressure to tackle inflation in the UK.

Furthermore, a somewhat upbeat market mood could be granting some support. The cheery trade may be elevating Sterling due to its increasingly risk-sensitive nature. Similarly, weakness in other currencies is likely lifting GBP rates by proxy.

GBP/EUR Exchange Rate Forecast: Lack of Data to Weigh on GBP?

Looking ahead to early next week, the Pound is unlikely to see much in the way of firm movement. With the data calendar once again relatively sparse, external and domestic factors could weigh on Sterling.

Early on Tuesday, however, the British Retail Consortium (BRC) release their latest retail sales monitor. With previous data releases trending upward, a continued increase could buoy GBP by indicating strength in the sector.

For the Euro, Germany’s latest industrial production data is scheduled to print on Monday. Over March, economists have forecast that production fell by 1% from February.

If this prints accurately, it may reaffirm signs of weakness in the German economy. As the bloc’s largest, this could cast a shadow on the Eurozone economy and weigh on the single currency.

On Wednesday, the final German inflation print is scheduled to release. If this prints below preliminary readings, the Euro could weaken.

John Mulcahey

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