GBP/EUR Exchange Rate: Pound Sinks to Five-Month Low as Recession Fears Flare
The Pound Euro (GBP/EUR) exchange rate fell over the past week, as anxiety over the UK economy increased.
Initially, the Pound managed to gain ground following the latest inflation data. Inflation printed above expectations in September, but a bearish market mood subsequently trimmed these gains.
Thursday saw Sterling trade without much direction, due to a lack of data releases. Recession worries came to the forebear, restricting movement.
Following a dismal retail sales print, GBP/EUR sank to a five-month low. September’s figures showed a grim 0.9% contraction in sales growth, reigniting recession jitters.
Looking ahead, data is in short supply for Sterling over the next few days. As such, GBP may be left exposed to shifts in risk appetite. If trading conditions improve, the increasingly risk-sensitive Sterling could strengthen.
GBP/USD Exchange Rate: Pound Undermined by Poor Private Sector Data
The Pound US Dollar (GBP/USD) exchange rate oscillated lower over the past week, amid downbeat UK data releases.
Monday saw GBP exchange rates stagnate against most major peers, as the data calendar lightened. Continuing geopolitical tensions further served to cap Sterling, though it managed to gain ground as USD weakened.
Then, the latest unemployment data pointed to a slowdown in the UK labour market, and October’s PMIs reported a further contraction in private sector growth. These dour results served to pare Bank of England (BoE) interest rate rise bets, weakening GBP.
Macroeconomic releases became thin on the ground thereafter, capping investor sentiment towards Sterling.
Next week, the data drought continues. As such, movement in the Pound may be limited ahead of the BoE’s interest rate decision on Thursday.
USD/GBP Exchange Rate: US Dollar Strengthens as US PMIs Beat Forecasts
The US Dollar Pound (USD/GBP) exchange rate strengthened over the past seven days, as US PMIs returned to growth.
In the second half of last week, a sour market mood and rising US Treasury yields underpinned USD exchange rates. Similarly, oil prices rose, prompting speculation that they may stoke inflation and prompt further rate hikes from the Federal Reserve.
Yields then began to pull back, leading the ‘Greenback’ to lose ground against its peers over Thursday and Friday. However, continued fighting between Hamas and Israel served to underpin the safe-haven US Dollar.
Escalating violence between Hamas and Israel soured the market mood last Friday, bringing safe-haven flows to the ‘Greenback’.
Fed rate hike bets began to diminish on Monday, which weighed heavily on USD exchange rates. Caution amongst investors provided cushioning from severe weakness.
Yesterday, robust private sector data brought cheer to USD investors. Both services and manufacturing sectors returned to growth in October, boosting Fed hike bets.
Tomorrow, the latest US GDP data will shine a light on how the US economy fared in the third quarter. On a quarter-by-quarter basis, the US economy is anticipated to have grown by 4.3%, which could catapult USD higher.
EUR/USD Exchange Rate: Euro Seesaws amid Bleak Economic Data
Trade in the Euro US Dollar (EUR/USD) exchange rate traded in a wide range over the past week.
With the US Dollar gathering pace at the start of the week, the pairing’s negative correlation served to undermine the Euro. However, risk averse trade brought some support to the common currency.
Cautious trade continued to underpin EUR exchange rates, as the dip in USD served to further bolster the Euro.
Owing to a lack of data releases, the Euro saw flat trade on Monday, with investors hesitant to support the currency. Focus began to shift towards the imminent interest rate decision from the European Central Bank (ECB).
Then, a dismal print in the Eurozone’s October private sector indexes weighed heavily on EUR exchange rates. A deepening contraction in private sector growth dented the Eurozone’s economic outlook, yielding further headwinds.
Tomorrow, the ECB is scheduled to announce its latest interest rate decision. Markets expect the bank to keep interest rates steady at 4.5%. Unless the ECB accompanies this with hawkish forward guidance, the Euro could weaken.