Pound Euro (GBP/EUR) Exchange Rate Flat as Euro Recovers
Article updated 16:36, 28/9/23:
The Pound Euro (GBP/EUR) exchange rate is trading within narrow boundaries this afternoon. The Euro (EUR) has managed to stage a recovery against its peers, despite underwhelming economic data.
The shift towards bullish trade is weighing significantly on the US Dollar (USD), thus funneling support towards EUR due to their negative correlation. This is prompting investors to shrug off a significant cooldown in German inflation, which likely further diminished European Central Bank (ECB) rate hike bets.
However, due to a lack of data on the Pound’s side, it was unable to capitalise on the upbeat market mood and rise against the safer Euro.
At the time of writing, GBP/EUR is trading at around €1.1555, showing little movement from the morning’s opening rates.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Edges Higher as EU Economic Optimism Stumbles
The Pound Euro (GBP/EUR) exchange rate is firming this morning, following a drop in the Eurozone’s economic sentiment index.
At the time of writing, GBP/EUR is trading at around €1.1576, rising by roughly 0.2% from the morning’s opening rates.
Euro (EUR) Slips as Economic Sentiment Dips
The Euro (EUR) is struggling to garner support this morning, following the publication of the latest Euro Area economic sentiment index.
In September, confidence decreased for the sixth consecutive month, falling to 93.3 from 93.6 in August.
However, the reading printed above forecasts of a further deterioration to 92.5, limiting EUR’s losses somewhat.
The fall was prompted by continually falling consumer confidence, as indicated by the accompanying report:
‘Consumer confidence (-1.6) declined markedly for the second month in a row, as survey respondents became more pessimistic about their household’s past and future financial situation and the expected general economic situation in their country. Consumers also signalled decreased intentions to make major purchases.’
With consumer optimism falling further beneath its long-term average, investors are turning away from EUR. The combination of elevated inflation and sky-high interest rates is continuing to bear down on the bloc’s economy.
Pound (GBP) Static amid Continuing Lack of Data
The Pound (GBP) is remaining pressured this morning, as the week’s short supply of data rolls on. With this in mind, Sterling is being left vulnerable to shifts in market mood.
Owing to a bearish impulse, the increasingly risk-sensitive Pound is seeing little support, with investors eyeing safer assets.
Thus far, Sterling has experienced muted trade as investors grow more concerned over the UK economy. Long-term struggles are on the horizon, as indicated by recent private sector indexes, leading to nervousness amongst investors.
Furthermore, investors are continuing to be unconvinced toward further interest rate hikes from the Bank of England (BoE). With inflation falling and the economy deteriorating, further hikes may push the UK into recession, prompting reticence amongst investors.
Pound Euro Exchange Rate Forecast: EU Inflation in Focus
Looking ahead for the Euro, tomorrow brings the release of the latest Eurozone inflation rate. The release follows a speech in the morning from European Central Bank (ECB) President Christine Lagarde.
If President Lagarde strikes a hawkish angle with her speech, the Euro could strengthen amid increased ECB rate hike bets.
However, any gains may be swiftly trimmed if inflation cools as significantly as expected. Economists forecast a fall in September’s core inflation to 4.8% from 5.3%, potentially indicating that inflation is firmly falling.
For the Pound, tomorrow sees the publication of the final UK GDP reading for the second quarter.
If the reading confirms that the UK economy avoided contracting over Q2, Sterling could see some support. However, if it misses the preliminary reading, GBP may struggle to attract support.
Elsewhere, risk aversion is like to be a significant contributor to GBP/EUR’s direction. A shift towards bullish trade could boost the increasingly risk-sensitive Pound.