Pound Euro (GBP/EUR) Exchange Rate Static amid Hawkish ECB Comments

Pound Euro (GBP/EUR) Exchange Rate Remains Static amid Hawkish ECB Comments

(Article updated 16:20, 19/5/23) The Pound Euro (GBP/EUR) exchange rate is remaining stagnant this afternoon, following bullish comments from European Central Bank (ECB) Policymaker Isabel Schnabel.

In a speech, Schnabel stated that:

‘The ECB can continue to do whatever is needed to bring inflation back to our 2% target in a timely manner. This implies raising rates to a sufficiently restrictive level and keeping them at that level for as long as necessary.’

Furthermore, ECB President Christine Lagarde commented that the ECB would take the decisions needed to bring inflation down to 2%.

At the time of writing, GBP/EUR traded at around €1.1530, showing little movement from the morning’s opening rates.

Original article continues below:

Pound Euro (GBP/EUR) Exchange Rate Narrows amid Lack of Impactful Data

The Pound Euro (GBP/EUR) exchange rate is trading in narrow bounds this morning, with a lack of data prevent GBP from gaining much ground.

At the time of writing, GBP/EUR is trading at around €1.1499, showing little movement from the morning’s opening rates.

Pound (GBP) Stumbles amid Empty Data Calendar

The Pound (GBP) is lacking support this morning, as a lack of pertinent economic data leaves GBP an unappealing prospect.

This follows on from a week of sluggish momentum, as downbeat economic data has served to weaken GBP. Between the uptick in unemployment and dovish comments from Bank of England (BoE) Governor Andrew Bailey, rate hike bets are receding.

However, while usually a less notable release, the GfK consumer confidence index results could be cushioning GBP this morning.

Consumer confidence rose for the fourth consecutive month, to -27 in May. Marking the highest level in 15 months, households are beginning to hold a more positive view about the economy.

However, any potential support may be limited as it still reflects a sense of pessimism amongst UK consumers for the time being.

Euro (EUR) Struggles amid Cautiously Upbeat Trade

The Euro (EUR) is struggling for support this morning, as the safer currency is sapped of sentiment amid risk-on trade.

While markets still appear to be somewhat cautious, the safer single currency is likely being weighed down. Optimism over US debt ceiling talks is prompting investors to pursue a repricing of the US Dollar.

However, the Euro may be being cushioned by persistent bets on further tightening from the European Central Bank (ECB).

Over the week, ECB policymakers have repeatedly asserted that there’s more work to be done. Later today, both ECB President Christine Lagarde and policymaker Isabel Schnabel are due to speak. If they both continue to affirm a hawkish stance, EUR could strengthen over today’s session.

Furthermore, these bets could have been further compounded by a surprise rise in German PPI. In April, producer price inflation rose by 0.3% on a monthly basis in the bloc’s largest economy, which could be serving to cushion EUR.

GBP/EUR Exchange Rate Forecast: UK PMIs to Boost GBP?

Looking ahead to early next week for the Pound, the core catalyst of movement is likely to arrive on Tuesday. Then, the latest set of private sector PMI flashes are scheduled to print.

While manufacturing is forecast to increase to 48.8 in May, the service sector forecast is currently unknown. However, with recent data releases pointing to increased consumer optimism, it may surprise to the upside. In both instances, GBP is likely to strengthen.

For the Euro, Monday brings the latest consumer confidence flash for the bloc. A modest increase from -17.5 to -17 is forecast, which may bring some cheer to EUR investors.

However, by remaining in contractionary territory, it may do little for the Euro’s fortunes and any gains could be capped.

John Mulcahey

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