Pound Euro (GBP/EUR) Exchange Rate Bounces Back as Single Currency Stumbles
(Updated 15:45, 29/06/23) The Pound Euro (GBP/EUR) exchange rate managed to recoup earlier losses this afternoon as the single currency suffered from its negative correlation to the US Dollar (USD).
USD surged higher after upbeat American economic data boosted bets on more Federal Reserve interest rate rises.
Lower than expected jobless claims and the upward revision to 1Q GDP pulled up Treasury yields. The fed funds futures market is now pricing in a greater likelihood of 2 hikes this year. pic.twitter.com/8MbCeZvfuH
— Kathy Jones (@KathyJones) June 29, 2023
This put notable pressure on the Euro (EUR), allowing the GBP/EUR exchange rate to regain lost ground.
However, the Pound (GBP) remains muted below €1.16, still down from yesterday’s levels. Sterling has come under increasing pressure in recent weeks amid a darkening outlook for the UK economy. Stubbornly high inflation and rising borrowing costs are likely to push the country into a recession, and the recent crisis at Thames Water has added to a gloomy outlook among GBP investors.
At the time of writing, GBP/EUR is trading at €1.1591. This is modestly up on the day but still a full cent down from its high point at the start of the week.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Struggles Near One-Month Low
The Pound Euro (GBP/EUR) exchange rate is trading close to a one-month low today as worries about the UK economy keep Sterling on the defensive.
At the time of writing, GBP/EUR is trading at around €1.1581, having wavered in a narrow range today.
Pound (GBP) Under Pressure amid UK Woes
The Pound (GBP) is struggling today as worries about the UK’s economic outlook continue to pressure the currency.
With UK inflation remaining worryingly high and the Bank of England (BoE) set to continue raising interest rates, the long-term British economic outlook is bleak.
Today, UK mortgage rates are continuing to rise. This intensifies fears of a ‘mortgage timebomb’, as many homeowners will see their repayments soar when they need to secure a new deal.
Meanwhile, the recent turmoil at Thames Water has sparked wider fears of a crisis among the UK’s water utility firms. Many analysts expect the indebted Thames Water to be bailed out by the government, at the cost of the taxpayer, during a time when public finances are already under significant strain.
Both these factors add to a general sense of foreboding for the UK economy, dashing recent hopes that Britain was more resilient than expected.
Euro (EUR) Remains Supported by ECB Bets
Meanwhile, the Euro (EUR) is underpinned by recent hawkish comments from European Central Bank (ECB) policymakers.
At the ECB’s Sintra Forum, many rate setters – including President Christine Lagarde – signalled that the bank would continue raising interest rates. They also pushed back on rate cut expectations.
During today’s session, EUR is struggling to press the advantage as investors await some potentially impactful Eurozone data releases.
An upbeat market mood is also stifling the single currency’s potential. Investors see the Euro as a safer asset than the increasingly risk-sensitive Pound, so the cheery tone is weighing on the former and lending support to the latter.
Nevertheless, EUR is holding strong against GBP, trading close to a one-month high hit yesterday.
Pound Euro Exchange Rate Forecast: German Inflation to Boost EUR?
Looking ahead, Germany’s consumer price index for June could see the Euro strengthen later in the session.
Forecasters expect German inflation to have risen this month, which could boost expectations for a hotter Eurozone CPI tomorrow. Signs of persistently high inflation in the bloc will likely lift ECB rate rise bets, which in turn could support the single currency.
Before then we have the Eurozone’s latest economic sentiment reading. A modest decline in morale could dent EUR.
As for the Pound, a lack of data throughout the day could leave Sterling vulnerable to shifts in market risk appetite. If the mood sours, the riskier UK currency could face losses.
Domestic headlines could also continue to impact the Pound. Fresh worries about the UK cost-of-living crisis, a looming recession, or the desperate state of water utility firms could all pile pressure on GBP.