Pound Euro Exchange Rate Drifts Up despite Gloomy UK Outlook

Pound Euro (GBP/EUR) Exchange Rate Edges Higher as Sterling Shrugs Off Economic Concerns

The Pound Euro (GBP/EUR) exchange rate is ticking up this morning, even though UK data is sparse today and there have been new gloomy comments regarding the UK economy.

At the time of writing, GBP/EUR is trading at €1.1616, up roughly 0.3% from this morning’s opening rate.

Pound (GBP) Firms despite ‘Economic Downturn’ Warning

The Pound (GBP) is drifting higher against most of its peers this morning, even with a lack of market-moving data and a fresh warning of a looming recession.

Bond fund giant Pimco commented on the UK’s current economic situation, with Chief Investment Officer, Daniel Ivascyn, forecasting the UK to experience ‘greater economic strain’ than that of the US next year.

He predicts:

‘In the case of the UK — a smaller, open economy, with a consumer that’s feeling the brunt of central bank policy far more than their US counterparts — you just have a higher probability of more significant economic deterioration.

‘We do think there’s potentially more hard landing risks.’

Despite more cautions of economic deterioration, Sterling is still managing to rally as the riskier currency is supported by the current cheery market mood.

Euro (EUR) Firms as Inflation Prints as Expected

The Euro (EUR), although down against the Pound, is trending higher against most of its counterparts today, following yesterday’s hawkish consensus amongst several European Central Bank (ECB) policymakers, and after the final Eurozone inflation report printed as expected.

The Eurozone’s finalised consumer price index confirmed that headline inflation came in at 2.4%, reporting a fall from the previous 2.9%, and the lowest it has been since July 2021.

Despite confirmation of the cooldown in inflation, EUR is finding strength against some peers. Yesterday’s hawkish rhetoric from ECB officials may be aiding the Euro, as multiple policymakers pushed back on rate cut speculation.

However, EUR is still weakening against GBP as a risk-on mood sees investors favour the riskier Pound versus the safer Euro.

Pound Euro Exchange Rate Forecast: Cooldown in Inflation to Dent the Pound?

Looking ahead, tomorrow brings the release of the UK’s latest inflation report.

Market predictions for headline inflation are that it will have cooled, from 4.6% in October to 4.4% in November. Core inflation is also expected to fall, from 5.7% down to 5.6% for this reading. If the results meet forecasts, this could undermine the Pound moving forward.

Looking at the Euro, tomorrow also brings a significant data release for the European currency, with the release of Germany’s consumer confidence index. The previous reading printed at a -27.8, with experts predicting a slight increase to -27 for the latest results. Should the index print as predicted, or show a better-than-expected improvement in household morale, this could aid the Euro.

Sarah Ebrahem

Contact Sarah Ebrahem

Do Not Sell My Personal Information