GBP/EUR Exchange Rate: Pound Fluctuates amid Short Supply of Data
The Pound Euro (GBP/EUR) exchange rate seesawed over the past week, as a lack of data left the Pound (GBP) to trade on risk appetite.
Initially, the Pound remained largely rangebound as the tepid market mood kept the increasingly risk-sensitive currency lowered.
Thursday saw Sterling endure some pressure, following downbeat retail sales data from the Confederation of British Industry (CBI). The CBI found that retail sales had fallen sharply for the sixth consecutive month, denting GBP.
Sterling then saw largely rudderless trade on Friday, as the data calendar lightened once again. However, GBP did manage to strengthen against some weaker currencies.
Tomorrow, the Bank of England (BoE) is due to announce its latest interest rate decision. Markets widely expect no change to rates, which could dent Sterling unless hawkish forward guidance is provided.
GBP/USD Exchange Rate: Pound Mixed amid Data Lull
The Pound US Dollar (GBP/USD) exchange rate traded in a mixed capacity at the beginning of this week, due to a continued lack of data.
Monday saw GBP exchange rates subdued against most peers, with few macroeconomic releases to spur movement. As such, the focus remained on the health of the UK economy, which created some headwinds.
This lull in data continued, with Sterling unable to gain a foothold in midweek trade. The focus shifted towards the upcoming BoE interest rate decision, with expectations of a further hold capping GBP.
The UK’s final manufacturing index for October was revised lower on Wednesday, which served to restrict Sterling.
Next week, the lack of notable UK data continues. As such, movement in the Pound may be limited, as investors may focus on the UK’s downbeat economic outlook.
USD/GBP Exchange Rate: US Dollar Seesaws amid Cooling Inflation
The US Dollar Pound (USD/GBP) exchange rate saw choppy trade over the past seven days as US inflation continued to cool.
In the second half of last week, further fighting between Israel and Hamas served to scupper the market mood. This brought safe-haven flows to the US Dollar (USD), lifting it against the riskier Pound.
However, the mood shifted towards the end of last week, prompting investors to ignore better-than-forecast US GDP data. Furthermore, the robust growth amplified hopes that the Federal Reserve would achieve a ‘soft landing’.
On Friday, the core PCE price index cooled in line with forecasts, leading to further pared back Fed hike bets, weighing on USD.
Cheery trade on Monday weakened USD exchange rates as investors favoured riskier assets. Additionally, the perception continued to grow that the Fed will leave rates unchanged, bringing headwinds.
While falling consumer confidence undermined USD at the beginning of Tuesday’s trade, risk appetite waned. This allowed the ‘Greenback’ to rebound against its peers.
Tonight, the Federal Reserve unveils its latest interest rate decision. Economists expect the Fed to leave rates unchanged, but to potentially keep the door open to future tightening. If the bank follows through with this, USD could strengthen.
EUR/USD Exchange Rate: Euro Rocked by Dovish ECB Pause
Trade in the Euro US Dollar (EUR/USD) exchange rate was volatile over the last seven days.
Last Wednesday, the latest German business climate index beat forecasts, lending support to EUR.
However, the European Central Bank (ECB) brought its 15-month tightening cycle to a halt, significantly weakening the common currency. ECB President Christine Lagarde highlighted the fragility of the Eurozone economy, further denting EUR.
This decision served to weigh on the Euro through to the end of the week, as the dovish tilt undermined the currency.
Early this week, German GDP data for the third quarter printed at -0.1%, showing a smaller contraction than expected. This lent some support, before a sharp cooldown in German inflation trimmed these gains.
Next week, a slate of German industrial data is due to print. Both industrial production and factory orders are due to return to growth, which could boost the common currency.