Pound Euro (GBP/EUR) Exchange Rate Vulnerable to Market Mood
The Pound Euro (GBP/EUR) exchange rate is muted this morning amid a gloomy UK economic outlook, as cautious trade continues to influence the pairing.
At the time of writing the GBP/EUR exchange rate is trading at €1.1578, virtually unchanged from this morning’s opening rate.
Pound (GBP) Muted amid UK Economy Concerns
The Pound (GBP) is subdued this morning as concerns surrounding the UK’s economic outlook persist following yesterday’s lacklustre GDP data.
UK economic pessimism continues to deter GBP investors, amid fears the country is at risk of slipping into a recession.
Similarly, investors seem to have severely undercut Bank of England (BoE) interest rate hike bets following a recent bout of economic uncertainty.
Though UK inflation looks to be falling, it currently stands at 6.7% significantly above the 2% target. The central bank’s most recent decision to leave interest rates on hold indicated a lean toward more dovish policy as UK inflation cools.
David Bharier, head of research at the British Chambers of Commerce, suggested that ongoing signs of a UK economic slowdown led the Bank of England to enact its hold on interest rate increases last month.
Bharier commented:
‘The UK economy is holding up but remains in a precarious state’.
Elsewhere a cautious market mood also leaves the Pound with limited support this morning.
Euro (EUR) Mixed Following Industrial Production Data
The Euro (EUR) is fluctuating this morning despite the Eurozone’s latest industrial production data appearing supportive of the common currencies’ recent gains.
Today’s data shows industrial production in the Eurozone returned to growth territory in August, hitting 0.6%, and surpassing the forecast 0.1%.
This helps to extend yesterday’s gains, after the minutes from the European Central Bank’s (ECB) September policy meeting struck a slightly more hawkish tone than anticipated.
However, the upside in the Euro appears to be capped as European gas prices continue to soar amid the Israel Hamas conflict. With prices hitting their highest since February there are concerns that higher energy prices could negatively impact economic activity in the Eurozone over the winter.
Pound Euro Forecast: ECB Speeches to Dent EUR?
Looking forward, ECB President Christine Lagarde is due to deliver two speeches in the coming days. Amid a lack of notable data, Lagarde’s commentary may well drive market volatility.
If Lagarde strikes a dovish tone, the Euro could face headwinds later this afternoon.
Turning to the UK, a lack of immediate notable data might leave the GBP vulnerable to risk sentiment, which could be driven by an ongoing wave of cautious trade across global markets. Amid the ongoing conflict in the Middle East, investors may continue to favour safer currencies, in place of the increasingly risk-sensitive Pound.