Pound Euro (GBP/EUR) Exchange Flat amid Volatile Market Mood
The Pound Euro (GBP/EUR) exchange rate is muted this morning amid ongoing Middle Eastern conflict and a souring market mood.
At the time of writing the GBP/EUR exchange rate is trading at €1.1577, virtually unchanged from this morning’s opening rate.
Euro (EUR) Pressured by Cooling German Inflation
The Euro (EUR) is quiet this morning after Germany’s final consumer price index confirmed a sharp cooldown in inflation.
Today, Germany’s CPI for September was released, confirming that German inflation has cooled to 4.5%. As Germany is the Eurozone’s largest economy, a drop in German inflation could signal easing price pressures in the wider Eurozone, therefore dampening European Central Bank (ECB) interest rate hike bets.
Ruth Brand, President of the Federal Statistic Office, commented on German inflation rates:
‘The rate of inflation has dropped to the lowest level since the start of the war in Ukraine. It remains high, however. Consumers are still clearly feeling the higher food prices.’
As inflation cools within the Euro bloc’s most prominent economy, investors are once again reminded that the ECB may be at the end of its hiking cycle. This is keeping EUR muted, although the figures met expectations, so any downside pressure is limited.
Pound (GBP) Struggles amid Market Fears
The Pound (GBP) is subdued this morning amid ongoing worries about the UK’s economic outlook, as conflict in the Middle East raises fears of another inflation shock.
As fears of escalation in the Israel-Hamas conflict persist, markets are spooked by the possibility of rising global inflation, drawing investors to safe-haven currencies while the increasingly risk-sensitive Pound remains subdued.
The unfolding crisis triggered a spike in oil prices, which could lead to a fresh acceleration in inflation and threaten a global recession.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, commented:
‘There are concerns creeping back in about higher energy prices, causing fresh inflationary pressures by pushing up fuel bills and potentially causing havoc with central bank forecasts. UK and European gas prices shot up over supply concerns, edging down only a little and still hovering around six-month highs.’
As oil prices soar amid faltering global markets, GBP is left to trade sideways whilst investors hedge their bets on safer currencies rather than the riskier Pound.
Pound Euro Exchange Rate Forecast: UK GDP to Bolster Sterling?
The conflict in the Middle East could continue to drive market volatility, as investors respond to the unfolding crises. This could lead investors to safe-haven currencies in place of the more risk-sensitive Pound.
Tomorrow, the UK’s monthly GDP figures are due to be released. Expected economic growth of 0.2% may provide Sterling with a much-needed boost, allowing GBP to catch a few bids.
The Eurozone will see a series of speeches from various acting members of the European Central Bank this week. In the absence of any notable data, it is likely that ECB commentary will drive the Euro’s movement. The central bank has recently been unclear in its suggestion of impending policy. If a hawkish tone is adopted in the coming days, the Euro may recoup recent losses.