Pound Euro (GBP/EUR) Exchange Volatile as Economic Pessimism Lingers
The Pound Euro (GBP/EUR) exchange rate is fluctuating in a narrow range as economic uncertainties stifle significant movements in the currency pairing.
At the time of writing the GBP/EUR exchange rate is trading at $1.1466, virtually unchanged from this morning’s opening rate.
Pound (GBP) Wavers Following BoE Rate Hold
The Pound (GBP) is moving without a clear direction this morning following the Bank of England’s (BoE) interest rate hold.
The BoE’s decision to hold interest rates came yesterday, as anticipated, although three of the nine policymakers voted for a rate hike.
The minority vote suggested that the central bank’s hiking cycle may not be over. This is softening the blow to GBP as investors speculate potential rises in coming months.
Andrew Bailey, Governor to the Bank of England, commented on the central bank’s decision to hold:
‘We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target.
We’ll be watching closely to see if further rate increases are needed.’
Ultimately, investors are focusing on Bailey’s assertion that rates needed to remain higher for longer. As such, GBP is remaining tepid as markets believe the BoE’s hiking cycle has now ended.
Euro (EUR) Choppy amid Eurozone Economic Uncertainty
The Euro (EUR) is wavering this morning following the release of downbeat German data.
German exports weakened further in September, falling well below economists’ forecasts of -1.1%, to -2.4%. As exports play a significant role in the German economy, ongoing fragility in German trade looks to be pressuring the Euro today.
Germany’s latest trade data reported a narrowing of the trade surplus, amplifying concerns of economic downturn.
Carsten Brzeski, Global Head of Macro at ING, commented:
‘Things are still looking pretty downbeat for Germany’s economy.
As positive signals remain absent, the base case for the German economy over the next months remains stagnation at best.’
In contrast, the Eurozone’s unemployment rate for September remained near historic lows, despite a minor uptick to 6.5%. The slight increase from August’s 6.4% did little to sway EUR investors, suggesting a more optimistic outlook for the Eurozone’s economy amid signs of a resilient labour sector.
Pound Euro Exchange Rate Forecast: BoE Speeches to Drive GBP Volatility?
Coming up, speeches from BoE officials may also drive GBP volatility later today. Chief Economist Phil Huw and Monetary Policy Committee (MPC) member Jonathan Haskell will speak this afternoon, addressing central bank monetary policy.
Should the two policymakers echo the bank’s ‘higher for longer’ narrative regarding interest rates, GBP could strengthen amid speculation of future interest rate hikes.
The UK’s finalised services PMI for October also is due out later today. Any significant deviations from last week’s preliminary readings could trigger choppy trade for Sterling.
Looking to the Euro area, September’s German factory orders data is due for release. Economists forecast a significant drop of 1.3%, which may dent EUR by showing further weakness in the German economy.