Pound Euro (GBP/EUR) Exchange Rate Wavers on Disappointing UK GDP Data
(Article updated 08:41, 13/7/23)
The Pound Euro (GBP/EUR) exchange rate is seeing choppy trade this morning, following the latest UK GDP data.
While May’s monthly release exceeded expectations, the 0.1% contraction still weighs on sentiment towards GBP.
Analysis from economists is likely capping Sterling, as the picture remains downbeat. Both housing and manufacturing sectors appear to be struggling, while inflation remains sky-high.
While rate hike bets may be underpinning Sterling, fears remain over an economic recession.
Nicholas Hyett, Investment Manager at Wealth Club, commented:
‘The housing market seems to be slowing, with less construction activity in housebuilding, and recruitment is seeing weakness too – potential canaries in the coal mine that suggest the economy has reached a turning point and is sliding from growth to contraction.’
At the time of writing, GBP/EUR is trading at around €1.1683, showing little movement from the morning’s opening rates.
Pound Euro (GBP/EUR) Exchange Rate Slides as EUR Propelled by Falling US Dollar
(Article updated 16:06, 12/7/23)
The Pound Euro (GBP/EUR) exchange rate is falling this afternoon, following the publication of the latest US consumer price index.
Inflation in America cooled significantly more than economists anticipated, which in turn dented the US Dollar. This brought further strength to the Euro as the common currency holds a negative correlation with the ‘Greenback’.
However, the Euro was unable to gain an advantage over most other peers, due to its safer nature. On the back of the US CPI data, the market mood is improving and favouring more risk-sensitive currencies.
Yet, the Pound is unable to press this advantage over the Euro, as investors enact a spree of profit taking after Sterling hit multi-month highs against many peers.
At the time of writing, GBP/EUR is trading at around €1.1688, a fall of roughly 0.45% from today’s morning rates.
Original article continues below:
Pound Euro Exchange Rate Narrows as Investors Digest BoE Stability Report
The Pound Euro exchange rate is trading in narrow boundaries this morning, as investors consider the Bank of England’s (BoE) latest stability report.
At the time of writing, GBP/EUR is trading at around €1.1727, showing little movement from the morning’s opening rates.
Pound (GBP) Flat as Investors Pore Over BoE Stability Report
The Pound (GBP) is trading flatly this morning, as investors digest the Bank of England’s latest financial stability report.
The central bank found that all major banks in the UK passed their stress tests, and held enough liquidity to withstand another global slowdown. Because of this, the BoE appeared to imply room for additional tightening.
However, it also indicated that while the UK economy was displaying staunch resilience to higher interest rates, further pressure was still to come.
The report stated that:
‘The impact on the UK banking system through lower bank equity prices and increases in funding costs was limited, and market risk sentiment has stabilised since then. Nonetheless, elements of the global banking system and financial markets remain vulnerable to stress from increased interest rates, and remain subject to significant uncertainty, reflecting risks to the outlook for growth and inflation, and from geopolitical tensions.’
With the cost-of-living crisis already weighing on investors, Sterling’s gains from elevated rate hike bets appear to be capped.
Euro (EUR) Staid amid Light Data Calendar
The Euro (EUR) is lacking clear direction this morning, as a light data calendar limits sentiment towards the common currency.
As such, focus is likely shifted towards this afternoon, wherein European Central Bank (ECB) Chief Economist Phillip Lane is set to speak. While Lane is more focused on a data driven approach to further tightening, if he speaks in favour of further hikes EUR could strengthen over the session.
Elsewhere, bets on further interest rate hikes from the ECB continue to underpin the common currency. ECB President Christine Lagarde has previously indicated another hike in July, and opened the door to further tightening.
Furthermore, due to a tepid market mood, the safer Euro is able to recover ground against riskier assets, such as Sterling. Yet, the lack of data catalysts is preventing the common currency from building on this recovery.
GBP/EUR Exchange Rate Forecast: UK GDP Slowdown to Dent GBP?
Tomorrow, the Pound may weaken following the release of the latest GDP data. May’s reading is forecast to have contracted by 0.3%, while the three-month average is predicted to be -0.1%.
If both data sets indicate continued slowdown in the UK economy, investors may be reticent to bet on further tightening. Inflationary pressures are still gripping UK business and consumers, but a weakening economy may leave GBP in a bind.
For the Euro, Thursday brings the release of the latest ECB monetary policy meeting accounts. If these minutes nail on an additional rate hike in June, EUR could strengthen.
However, if they indicate a possible slowdown in the pace of tightening, the common currency could weaken.