Pound Euro (GBP/EUR) Exchange Rate Edges Higher as Market Mood Improves
Article updated 16:45, 14/11/2023:
The Pound Euro (GBP/EUR) exchange rate is firming this afternoon, as investors cheer rapidly cooling American inflation.
The latest US inflation data printed below expectations, and led to beliefs that the Federal Reserve would no longer have to hike interest rates. As such, markets cheered the prospect, flocking to riskier assets.
However, Sterling was unable to emphatically leap against the Euro due to EUR’s negative correlation to the US Dollar (USD).
At the time of writing, GBP/EUR is trading at around €1.1497, an increase of just under 0.2% from the morning’s opening rates.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Narrows amid Mixed UK Jobs Data
The Pound Euro (GBP/EUR) exchange rate is rangebound this morning, amid a mixed slate of UK labour data.
At the time of writing, GBP/EUR is trading at around €1.1460, showing little movement from the morning’s opening rates.
Pound (GBP) Wavers amid Mixed Labour Data
The Pound (GBP) is seeing mixed trade against its peers this morning, following the release of the latest UK labour data.
The data published by the Office for National Statistics (ONS) hewed more positive than anticipated. The UK’s unemployment rate held at 4.2% in September, beneath forecasts of an increase to 4.3%.
Similarly, while wage growth decelerated to 7.7%, it printed above inflation leading to a notable increase in ‘real pay’.
However, today’s data mostly provides positive news for UK households, but may not be enough to prompt further tightening from the Bank of England (BoE).
James Smith, Developed Markets Economist at ING, commented:
‘Private sector pay was unchanged in the most recent month, as the chart below shows. That means if you compare the most recent three-month period to the three months prior, the rate of growth has slowed a lot. These figures do bounce around, but it looks like a signal that momentum is slowing.’
With this in mind, BoE rate hike bets are likely being pared back, limiting Sterling’s upward movement.
Euro (EUR) Firms amid Improving German Sentiment
The Euro (EUR) is ticking higher this morning, following a promising print from the latest ZEW German sentiment index.
November’s reading came in at 9.8, reflecting a continuing improvement in economic optimism within the Eurozone’s largest economy. Additionally, the reading came in above expectations of a print at 5.
Achim Wamback, ZEW President, commented on the reading:
‘Economic expectations for Germany have again increased. At the same time, assessment of the current situation remains unchanged at a low level. These observations support impression that Germany’s economic development has bottomed out. Heightened economic expectations accompanied by significantly more optimistic outlooks for the German industrial sector’
With the German economic outlook improving on a monthly basis, EUR investors appear optimistic about the bloc’s wider prospects.
Pound Euro Exchange Rate Forecast: UK CPI in Focus
Looking ahead, tomorrow’s UK inflation data is likely to have a sizeable impact on the Pound. Economists forecast a notable cooldown in both core and headline rates, which could lead to pared back Bank of England hike bets.
If the data prints in line with expectations, the need for further tightening lessens as inflation continues to retreat. This would, in turn, weigh on GBP exchange rates.
For the Euro, tomorrow brings the release of the latest balance of trade data for the Eurozone. In September, the bloc’s trade surplus is forecast to have expanded significantly. If accurate, EUR could strengthen amid signs of improved trade.
On Thursday, European Central Bank President (ECB) Christine Lagarde is due to deliver a speech. If she maintains the ECB’s recent caution, EUR could soften.