Pound Euro (GBP/EUR) Exchange Rate Climbs as Recession Dodge Prompts BoE Hike Bets
Article updated 16:06, 11/8/23:
The Pound Euro (GBP/EUR) exchange rate is climbing higher this afternoon, as analysis of the UK’s latest GDP data supports Sterling.
With the UK having firmly avoided a Q2 recession, the cheery news has further opened the door to additional rate hikes. Due to the resilience shown, the Bank of England (BoE) may have further room to tighten as they move to battle inflation.
Elsewhere, hotter-than-expected PPI data has supported the US Dollar, which is weighing on the Euro. This pairing shares a negative correlation, meaning EUR is weakening as USD gathers pace.
At the time of writing, GBP/EUR is trading at around €1.158, rising by roughly 0.4% from the morning’s opening rates.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Rangebound amid Upbeat UK GDP Data
The Pound Euro (GBP/EUR) exchange rate is trading in narrow boundaries this morning, due to an upbeat UK GDP release.
At the time of writing, GBP/EUR is trading at around €1.1554, showing little movement from the morning’s opening rates.
Pound (GBP) Bolstered by Upbeat GDP Data
The Pound (GBP) is enjoying modest support this morning, following an upbeat set of UK GDP data.
The UK managed to avoid a recession, and even grew more than anticipated. Over the second quarter, the UK economy expanded by 0.2%, above forecasts of a stall. Furthermore, the UK economy managed to expand by 0.5% on a monthly basis.
Darren Morgan, Director of Economic Statistics at ONS, commented:
‘The economy bounced back from the effects of May’s extra bank holiday to record strong growth in June. Manufacturing saw a particularly strong month, with both cars and the often-erratic pharmaceutical industry seeing particularly buoyant growth.
Services also had a strong month, with publishing and car sales and legal services all doing well, though this was partially offset by falls in health, which was hit by further strike action.’
Furthermore, the resilience in the economy is likely to prompt further interest rate hikes from the Bank of England (BoE). Inflation remains a persistent thorn in the UK’s economy, and remains far beyond other G7 territories.
Despite the expansion, some analysts remain less bullish about the UK’s growth outlook. Recession anxieties still remain present, and a recession appears to remain on the cards due to further tightening from the BoE.
Euro (EUR) Lacks Direction as Data Drought Continues
The Euro (EUR) is lacking clear direction this morning, amid a continuing short supply of data releases.
However, owing to a somewhat cautious market mood, the common currency is being kept afloat by its safer stature. Yet, due to the lack of data catalysts, the Euro is unable to press the advantage against its peers.
Elsewhere, modest weakness in the US Dollar (USD) is likely bringing some tailwinds. The two currencies share a negative correlation, meaning that weakness for USD can contribute strength for EUR.
Pound Euro Exchange Rate Forecast: UK Labour Data in Focus
Looking ahead for the Pound, Tuesday brings the release of the latest unemployment and wage growth figures.
Economists forecast that unemployment will have held at 4% over June, while wage growth is forecast to have cooled. If both sets print accurately, it may yield mixed blessings for Sterling.
Wage growth has been considered a key inflationary pressure by the Bank of England, and a cooldown could lead to pared back hike bets.
For the Euro, Tuesday brings the release of the latest ZEW German economic sentiment index. Economists are forecasting growing pessimism towards the German economy over August, which could weaken the single currency.
Elsewhere, risk appetite is likely to play a role in shaping the pairing. Due to the Pound’s increasingly risk-sensitive nature, a shift towards bullish trade could push it up over the safer Euro.