Pound Euro (GBP/EUR) Exchange Rate Flat following UK GDP Data
The Pound Euro (GBP/EUR) exchange rate is muted this morning following the latest UK GDP figures and amid a lack of Eurozone data.
At the time of writing the GBP/EUR exchange rate is trading at €1.1581, virtually unchanged from this morning’s opening rate.
Pound (GBP) Muted amid Weak UK GDP
The Pound (GBP) is quiet this morning as GBP investors remain concerned about the health of the UK economy following August’s lacklustre GDP data.
The UK’s latest GDP figures came in as expected, showing economic growth of 0.2% in August. Though the British economy has returned to growth with a monthly increase from July’s 0.6% contraction, concerns of a possible UK recession remain.
Sandra Horsfield, Economist at Investec, commented on the UK economy’s weak outlook:
‘UK monthly GDP figures published this morning reported that output rebounded in August, by 0.2% on the month, in line with both our and the consensus forecast.
‘Coming after a 0.6% fall in output in July (initially reported as -0.5%) this leaves the possibility of a contraction in GDP in Q3 as a whole on the table’.
Although the latest uptick in GDP figures may keep Sterling afloat today, investors and analysts alike remain concerned for the future of the UK economy.
Euro (EUR) Flat Ahead of ECB Commentary
The Euro (EUR) continues to trade sideways this morning ahead of speeches due later today from key European Central Bank (ECB) policymakers and the meeting minutes from the bank’s September decision.
Investors anticipate dovish commentary from the ECB later today, which could in turn undercut rate hike bets. Following yesterday’s cooler-than-forecast inflation data for Germany, an easing in inflation is anticipated in the wider Eurozone area, further weighing on expectations of more tightening.
Pierre Wunsch, policymaker at the ECB, commented on the outlook regarding inflation and interest rates:
‘Maybe we’ve reached the peak in interest rates. If inflation meets forecast, then no more rate hikes are needed. We have to live with current uncertainty. Oil prices are an upside risk to inflation.’
Wunsch’s mixed commentary on ECB decision-making has left the common currency subdued as investors await September’s meeting minutes.
Pound Euro Forecast: ECB Speeches to Dent EUR?
In the absence of any notable data today, investors may look to the ECB’s minutes from last month’s meeting due out later today for an indication of the bank’s policy plans. This afternoon’s speech from policymaker Fabio Panetta may also provide more insights into policy expectations.
ECB President Christine Lagarde is also due to speak on Friday, with any dovish commentary likely to pressure the single currency.
The Eurozone’s industrial production figures are due out tomorrow. Monthly production is expected to have rebounded by a meagre 0.1% in August after July’s 1.1% slump. Such a weak rebound could leave EUR listless.
Looking ahead, hostility in the Middle East could continue to drive fluctuations in the market mood, as investors respond to the impacts of the escalating conflict on the global economic outlook. This could lead investors to safe-haven currencies in place of the more risk-sensitive Pound.