Pound Euro (GBP/EUR) Exchange Rate Remains Static amid Volatile Market Mood
Article updated 16:20, 10/10/2023:
The Pound Euro (GBP/EUR) exchange rate is remaining in narrow boundaries this afternoon, as the volatile market mood weighs on both sides of the pairing.
As an increasingly risk-sensitive currency, the Pound is unable to gain a clear foothold against its peers, and has trimmed earlier gains. Investors are likely remaining cognisant of the UK’s downbeat economic outlook, preventing further gains.
Meanwhile, the Euro (EUR) has been able to remain firm against its peers, but has receded from previous levels. This is likely due to investors seeking safer assets, cushioning EUR.
At the time of writing, GBP/EUR is trading at around €1.1566, showing little movement from the morning’s opening rates.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Narrows as EUR Firms on Soft USD
The Pound Euro (GBP/EUR) exchange rate is rangebound this morning, as EUR rates benefit from a softening US Dollar (USD).
At the time of writing, GBP/EUR is trading at around €1.1576, showing little movement from the morning’s opening rates.
Euro (EUR) Firms amid Softening US Dollar
The Euro (EUR) is firming this morning, amid a modest pullback in US Dollar (USD) rates. As the pairing shares a negative correlation, softening USD is serving to float the common currency.
While markets remain nervy as the conflict between Hamas and Israel continues, investors appear to have regained their appetite for stock trading.
Additionally, Federal Reserve speakers made dovish comments in the wake of surging bond yields. As such, the Euro is modestly capitalising on this, climbing against some peers.
However, the common currency’s gains are likely being limited by dovish remarks from European Central Bank (ECB) policymaker Francois Villeroy de Galhau.
In a speech, he stated:
‘We are particularly wary about oil price developments over Israel situation. We see clear tendency of inflation to decrease despite situation in Israel. Israel situation no reason for us at present to tweak inflation prospects, still see landing at around 2 pct by 2025. Interest rates now are on a good level.’
As such, EUR investors may have pared back bets on further interest rate hike from the ECB, contributing further headwinds.
Pound (GBP) Edges Higher despite Downgraded Growth Forecasts
The Pound (GBP) is ticking upward today, following a modest recovery in risk appetite across markets.
However, these gains are likely being offset by an increasingly dour economic outlook for the UK. The latest World Economic Outlook (WEO) report from the International Monetary Fund (IMF) indicates that the UK will be the slowest growing G7 country next year.
‘Fairly weak growth’ is anticipated, with the UK economy forecast to expand by a mere 0.6%. Interest rates are expended to remain restrictive, limiting room for the UK economy to breath.
Pierre-Olivier Gourinchas, Economic Counsellor at IMF, commented:
‘The general perspective on the UK is we have fairly subdued growth, we have falling momentum, a labour market that is cooling, but inflation remains quite persistent.
And that is going to require monetary policy to remain tight for a little while longer, into next year.’
Pound Euro Exchange Rate Forecast: ECB Lagarde Speech to Buoy EUR?
Looking ahead for the Euro, the core catalyst of movement is likely to come from ECB President Christine Lagarde’s speech this afternoon.
Recently, the bank has been mixed in its communication, and proved uninspiring to EUR investors. If President Lagarde takes a firmly hawkish stance, the common currency could strengthen.
This is then followed by the final German inflation print. If this shows a significant deviation from the preliminary reading, the Euro will likely see price adjustments.
For the Pound, data remains thin on the ground in the short term. Because of this, Sterling is likely to remain vulnerable to shifts in risk appetite.
If markets remain gloomy amid escalating conflict in the Middle East, Sterling is unlikely to gain much ground.