GBP/EUR Exchange Rate: Pound Ticks Up on Promising UK Economic Data
The Pound Euro (GBP/EUR) exchange rate trended higher through the latter half of last week. Sterling’s initial gains came on the back of a better-than-expected UK services PMI.
September’s finalised index suggested that the vital sector had contracted less than initially expected, cheering GBP investors.
Sterling was further garnished by hawkish comments from Bank of England (BoE) Deputy Governor Ben Broadbent. He stated that further interest rate hikes were an ‘open question’.
Bullish trade during Friday’s session allowed Sterling to close the week on stronger footing against safer assets, such as the Euro.
Looking ahead, the UK will publish its latest GDP data on Thursday. Economists forecast a 0.2% expansion in the UK economy in August. If accurate, Sterling could strengthen as recession fears ease.
GBP/USD Exchange Rate: Pound Edges Higher Despite Volatile Market Mood
The Pound US Dollar (GBP/USD) exchange rate has risen steadily so far this week, despite an anxious market mood.
Initially, the increasingly risk-sensitive Pound weakened as markets grew fearful amid conflict between Hamas and Israel. However, despite no clear catalyst, GBP managed to gain a foothold.
A lack of impactful economic releases likely capped Sterling’s gains, as did a downgraded growth forecast. The International Monetary Fund (IMF) now forecasts the UK economy will grow 0.6% in 2024, down from previous expectations for a 1% expansion.
Next week, the latest UK wage growth data is likely to be a core catalyst of movement for the Pound. Currently, forecasts indicate a cooldown in average earnings in August, which could weigh on GBP if it weakens BoE rate hike expectations.
USD/GBP Exchange Rate: US Dollar Slides on Dovish Fed Comments
The US Dollar Pound (USD/GBP) exchange rate weakened over the last seven days, amid diminished Federal Reserve rate hike bets.
At the beginning of the week, worrisome ADP employment figures sank the ‘Greenback’. The US economy added 89,000 jobs in September, significantly below forecasts.
However, non farm payrolls data smashed forecasts on Friday, indicating robust demand for employment. This brought fleeting gains to US Dollar, as it succumbed to profit taking towards the end of the session.
While the bearish market mood allowed USD rates to strengthen at the beginning of the week, these gains were swiftly reversed.
Fed officials commented on recent turbulence in the bond markets, and suggested that higher yields could lower the need for further tightening. This prompted pared back hike bets, leading the ‘Greenback’ to fall back again.
However, anxiety over conflict in the Middle East likely cushioned the safe-haven currency, as investors kept an eye toward safer investments.
Tonight, the minutes from the Fed’s September policy meeting are scheduled for publication. If they indicate there is appetite for additional tightening, the ‘Greenback’ could rally.
EUR/USD Exchange Rate: Euro Supported by Softening US Dollar
Trade in the Euro US Dollar (EUR/USD) exchange rate was a little mixed over the past week.
Falling USD rates served to support the common currency at the beginning of the week, but these gains were offset by downbeat retail sales data. August’s figures showed the largest drop in sales growth since December.
Hawkish comments from European Central Bank (ECB) Vice President Luis de Guindos outweighed German recession anxieties on Thursday. Guindos pushed back on rate cut bets, and suggested further hikes were possible if needed.
While German industrial production showed a recovery, it did little to boost EUR as analysts suggested production had stabilised at weakened levels.
Recently, softness in USD rates has once again served to benefit the common currency, lifting it against most peers.
Looking ahead, October’s German ZEW economic sentiment index is scheduled for release. Economists anticipate further deterioration in optimism amongst German businesses, which could weigh on the Euro.