Pound Euro (GBP/EUR) Exchange Rate Muted amid Volatile Market Sentiment
The Pound Euro (GBP/EUR) exchange rate is muted this morning as cautious trade continues to influence the pairing.
At the time of writing the GBP/EUR exchange rate is trading at €1.1539, virtually unchanged from this morning’s opening rate.
Pound (GBP) Muted amid Anxious Market Mood
The Pound (GBP) is quiet this morning ahead of this week’s key data releases, whilst global markets brace for volatility amid escalating conflict in the Middle East.
Amid a lack of notable UK data, the Pound remains vulnerable to risk sentiment today as well as facing continued undertones of ongoing UK economic pessimism.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, describes how the Israel-Hamas conflict is impacting investors’ movements:
‘As risk-off sentiment has been spreading, investors have been seeking more defensive positions amid fears of conflict escalating in the Middle East.’
As tensions increase within global markets, investors are flocking to safe-haven currencies, leaving the increasingly risk-sensitive Pound subdued amid the souring sentiment.
Euro (EUR) Flat following Mixed ECB Commentary
The Euro (EUR) is rangebound this morning following the European Central Bank’s (ECB) mixed remarks over the weekend.
Christine Lagarde, President of the ECB, addressed inflationary pressures and economic sentiment at her latest speech over the weekend:
‘The recovery prospects for the global economy remain fragile amid persisting geopolitical tensions, stemming in particular from Russia’s invasion of Ukraine, rising trade fragmentation and the possibility of renewed financial sector stress. Global headline inflation is receding, but underlying inflationary pressures remain persistent as labour markets continue to be tight’.
While Lagarde noted the strength of the Euro bloc’s labour sector, which has boasted continually low unemployment figures in recent months, the ECB President also highlighted ongoing inflationary pressures that the bank must consider ahead of future rate decisions. Following Germany’s recent disappointing inflationary data, Lagarde’s mixed commentary has left investors unsure of potential rate hikes, leaving the Euro rangebound today.
Amid geopolitical developments, EUR is enjoying some support thanks to the downbeat market mood. A weakened US Dollar (USD) this morning is also propping up the Euro, although the currency seems confined to a narrow range.
Pound Euro Forecast: Jobs Data to Boost GBP?
Looking ahead, the UK’s latest jobs report is due out tomorrow. Another record-high wage growth reading could bolster Bank of England (BoE) rate hike bets and lift the Pound. However, a possible rise in August’s unemployment figures could dent GBP, underpinning concerns of a slowing UK economy.
Due out tomorrow is the Germany’s ZEW economic sentiment index. This data functions to analyse the Germany’s measure of optimism surrounding economic developments over the next six months. Expected to rise from -11 to -9, the survey is forecast to indicate improving sentiment in the Eurozone’s largest economy, which may lift the common currency. Though still in contraction territory, the slight uptick may be welcomed by EUR investors.
The UK’s latest consumer price index is also due on Wednesday and is forecast to show cooling UK inflation. This could lead investors to rethink their current BoE rate hike bets and sink GBP exchange rates.
Likewise, the Eurozone’s final CPI data is also due out on Wednesday. A forecast cooling of inflation may potentially undercut ECB rate hike bets, denting the Euro.