Pound Euro (GBP/EUR) Exchange Rate Rebounds after Touching Six-Day Low
(Updated 16:05, 03/10/23) The Pound Euro (GBP/EUR) exchange rate fell to a six-day low this morning but managed to bounce back during the afternoon.
The initial downside in GBP/EUR came as the Euro (EUR) enjoyed hawkish comments from European Central Bank (ECB) Chief Economist Philip Lane. Lane outlined the upside risks to inflation and warned that ‘more work needs to be done.’
Meanwhile, the increasingly risk-sensitive Pound (GBP) struggled amid a gloomy market mood.
However, after hitting a six-day low at around midday, GBP/EUR rebounded.
There was no clear catalyst for the movement, with Sterling seemingly having entered oversold conditions. The Euro may have also suffered from its negative correlation with the US Dollar (USD), which remains remarkably strong.
At the time of writing, the Pound Euro pair is trading at around €1.1531, having bounced off an earlier low of €1.1507.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Edges Lower as ECB Remarks Lift EUR
The Pound Euro (GBP/EUR) exchange rate is softening today as hawkish European Central Bank (ECB) comments seem to have given the Euro (EUR) a leg-up and a risk-off mood weighs on the Pound (GBP).
At the time of writing, GBP/EUR is trading at around €1.1509, down just over 0.2% on the day.
Euro (EUR) Buoyed by Hawkish ECB Comments
The Euro is finding some success today after surprisingly hawkish comments from ECB Chief Economist Philip Lane.
Speaking at a conference in Lithuania, Lane highlighted the many upside risks to inflation. Food inflation, energy prices, services inflation and wage growth could all create challenges for the ECB over the coming months and even years, signalled the ECB policymaker.
He also indicated that another interest rate hike was possible, saying:
‘We are not yet at the inflation target, more work needs to be done.’
These remarks seemed to have buoyed the Euro, although investors may be taking Lane’s comments with a grain of salt. Policymakers have strongly hinted that the ECB is at the end of its tightening cycle, though they don’t want to sound too dovish in case financial conditions begin to loosen.
Pound (GBP) Struggles amid Risk-Off Mood
Meanwhile, the Pound lacks support amid an absence of UK economic reports.
With no new data to go by, GBP investors are left to mull over the UK’s gloomy economic outlook. Analysts are increasingly concerned that growth could remain sluggish over the coming years.
In addition, currency traders expect the Bank of England (BoE) not to raise interest rates higher, and this pullback in bets continues to pressure the Pound.
The market mood is also driving some movement in the increasingly risk-sensitive Pound today. A downbeat sentiment is seeing Sterling slip against its safer peers, such as the Euro.
Pound Euro Exchange Rate Forecast: UK’s Gloomy PMI to Dent GBP?
Looking ahead, Wednesday’s session could see some more notable movement in the GBP/EUR exchange rate as a raft of new data releases is due out.
First up, we have the final PMI readings for both the Eurozone and the UK. Confirmation that the British score came in lower than the Eurozone’s, reporting a worrying contraction in service sector activity, could add to the weight on the Pound.
Later in the morning, the Euro area’s August retail sales and producer price index are both out. Another decline in domestic sales could dent EUR, while an uptick in the monthly PPI rate may offset the downside by boosting ECB bets.
Speaking of the ECB, a number of policymakers are due to speak throughout the day, including President Christine Lagarde. If Lagarde echoes Lane’s comments from today, EUR exchange rates could strengthen. However, any indication that she believes rates have indeed peaked could see the Euro slide.