Pound Euro (GBP/EUR) Exchange Rate Edges Lower as Market Mood Sours
Article updated 16:40, 10/11/2023:
The Pound Euro (GBP/EUR) exchange rate is ticking lower this afternoon, as the market mood deteriorates.
As the Pound is an increasingly risk-sensitive currency, the downbeat tone to the session is preventing upward movement.
Following a set of downbeat US consumer confidence data, the market mood began to sour. The US economy is heavily dependent on consumer spending, and a sign of slowdown here is enough to undermine investor confidence.
At the time of writing, GBP/EUR is trading at around €1.1436, a drop of just under 0.2% from the morning’s opening rates.
Pound Euro (GBP/EUR) Exchange Rate Rangebound amid Flat UK Economic Growth
The Pound Euro (GBP/EUR) exchange rate is trading flatly this morning, following news of stagnation in the UK economy.
At the time of writing, GBP/EUR is trading at around €1.1442, showing little movement from the morning’s opening rates.
Pound (GBP) Stifled by Stagnating Economy
The Pound (GBP) is trapped in narrow boundaries this morning, following a concerning UK GDP data release.
In the third quarter, economic growth flatlined, printing at 0% compared to Q2’s reading. While above forecasts of a 0.1% contraction, the overriding picture is of an economy teetering on the edge of recession.
The data appears indicative of how the Bank of England’s (BoE) interest rate hikes have begun to affect the economy.
Jeremy Batstone-Carr, European Strategist at Raymond James Investment Services, said:
‘ONS data released today reveals flatlining in GDP, reflective of the lagged effect of the Bank of England’s aggressive rate hikes on economic activity. These figures represent a grinding continuation of the UK’s lacklustre economic performance, a period of weakness stretching back more than two years.’
The morning’s data simultaneously indicating worrying economic activity, and undermining the chance of future tightening, leaving GBP with little buoyancy.
Euro (EUR) Quiet as Markets Await ECB Lagarde Speech
The Euro (EUR) is trading quietly this morning, owing to a lack of data releases for investors to jump on. As such, attention is shifting towards a speech from European Central Bank (ECB) President Christine Lagarde.
Recent communications from the ECB have begun to move towards tempering market expectations of cuts, rather than suggesting further hikes. If Lagarde continues this path, the Euro could slip later today.
Francesco Pesole, FX Strategist at ING, commented:
‘A slow shift from trying to convince markets another hike is a possibility (like in the US, investors remain hard to persuade) to pushing back more directly against rate expectations may start to appear more clearly in ECB members’ remarks.’
Elsewhere, Federal Reserve Chair Jerome Powell delivered a hawkish speech last night, which is serving to underpin the US Dollar (USD). In turn, this is muting EUR due to the pairing’s negative correlation.
Pound Euro Exchange Rate Forecast: UK Labour Data in Focus
Looking ahead for the Pound, the core catalyst of movement is likely to be Tuesday’s slate of labour data.
September’s unemployment rate and wage growth figures are due to be published, with the unemployment rate forecast to increase. If the rate increased from 4.3% to 4.4% in September, GBP could struggle amid signs of further slowdown in the labour market.
Wage growth, meanwhile, is forecast to have stayed at 7.8% in September. This could lift Sterling’s fortunes, as it may spark renewed rate hike bets, as it is considered an inflationary pressure.
For the Euro, Tuesday brings the release of the latest ZEW economic sentiment index. In November, German business confidence is forecast to have recovered significantly, which could strengthen the common currency.