Pound Euro (GBP/EUR) Exchange Rate Fluctuates amid Economic Pessimism
The Pound Euro (GBP/EUR) exchange rate is moving without a clear trajectory this morning despite disappointing UK retail sales.
At the time of writing the GBP/EUR exchange rate is trading at around $1.144, virtually unchanged from this morning’s opening rate.
Pound (GBP) Slumps amid Economic Slowdown Worries
The Pound (GBP) faces pressure today amid weaker-than-forecast retail sales data.
The UK’s latest retail sales unexpectedly fell by 0.3% in October, missing forecasts of 0.3% growth. As cost-of-living concerns continue to stifle consumer activity, worries that the UK’s retail sector remains weak saw a resurgence in recent recession worries. With a UK recession by the fourth quarter seemingly increasingly likely, GBP faces headwinds today.
Sandra Horsfield, an economist at Investec, affirmed the likelihood of a looming UK recession:
‘Initial estimates had suggested the economy just about avoided a contraction (at least after rounding) in Q3, but with releases such as today’s, it is possible that this changes in subsequent releases of GDP statistics.
In any case, we remain of the view that a winter recession looks likely, as higher interest rates gradually feed through and take their toll on household and business finances.’
As the UK’s economic outlook remains bleak, GBP initially slumped at the start of Friday’s session.
However, it managed to bounce back against its safer rivals and recoup the morning’s losses amid a risk-on mood.
Euro (EUR) Choppy amid Data Lull
The Euro (EUR) is mixed this morning amid a lack of fresh Eurozone data.
A hotly anticipated speech from European Central Bank (ECB) President Christine Lagarde had little impact on interest rate hike bets this morning, as Lagarde opted to remain silent on the topic of monetary policy.
Additionally, the Eurozone’s final inflation rate for October was released. The finalised report printed in line with preliminary readings, at 2.9%. With no significant deviation from forecasted figures, the data had a limited impact on the Euro’s movements. However, it does confirm that inflation in the bloc rapidly cooled last month, thereby boosting expectations that the ECB is done tightening.
An increasing appetite for risk also looks to be capping EUR’s upside potential this morning, as investors lean towards more risk-sensitive currencies in place of the safe-haven Euro. The common currency may remain vulnerable to shifts in risk appetite as today’s session progresses, amid a lack of notable Eurozone data.
Pound Euro Exchange Rate Forecast: Autumn Statement to Drive GBP Volatility?
Coming up, investors may look to this year’s Autumn Statement, due for release on Wednesday. As the UK government’s formal economic update, provision of a bleak outlook could see the Pound falter. Should the statement suggest that the UK may slip into recession this winter, concerns of a slowing UK economy may continue to dampen investor interest in the Pound. The announcement of any significant changes to tax and spending decisions may also drive GBP volatility.
In addition, Bank of England (BoE) Governor Andrew Bailey is due to speak on Monday and could impact GBP. Should Bailey echo the central bank’s increasingly dovish stance on monetary policy, GBP may falter amid continually falling BoE rate hike bets.
Looking to the Eurozone, various speeches from ECB policymakers are likely to drive EUR volatility. Following Lagarde’s silence on the matter today, investors may be particularly keen to hear ECB officials discuss interest rate projections in the coming days. Should policymakers strike a dovish tone, the common currency may stumble.