Pound Euro (GBP/EUR) exchange rate muted as latest ECB economic bulletin published
The Pound Euro (GBP/EUR) exchange rate is trading sideways this morning, following the publication of the European Central Bank’s (ECB) latest economic bulletin.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1619, virtually unchanged from this morning’s opening rate.
Euro (EUR) mixed following latest ECB economic bulletin
Trade in the Euro (EUR) is mixed this morning, following the publication of the latest European Central Bank’s (ECB) economic bulletin.
Amongst other points, December’s document emphasised the central bank’s stance on keeping interest rates higher for longer.
An excerpt from the bulletin reads:
‘The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. Based on its current assessment, the Governing Council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal. The Governing Council’s future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary.’
The bulletin is lending some support to the single currency this morning as it reinforces the ECB’s s efforts to push back against interest rate cut speculation.
However, the upside potential of the Euro still remains limited as markets brace for the latest US inflation figures later this afternoon.
Pound (GBP) flat on latest UK inflation forecasts
The Pound (GBP) is trapped in a narrow range against most of its peers today, amid fresh speculation the Bank of England (BoE) may begin cutting interest rates a little earlier than previously thought.
Investors had previously bet the first rate cut from the BoE would come in May, as the BoE’s latest forecasts predicted inflation would remain elevated through 2024.
However, independent forecasters are predicting that inflation will drop much faster than expected and could even fall to approximately 2% by April 2024, re-stoking GBP investor speculation of the possibility of rate cuts sooner than expected.
The Oxford Economics consultancy and analysts at Investec and Deutsche Bank said that their forecasts don’t come without risk, and put down the majority of their speculation to a crash in energy prices and the cost of oil.
The new predictions may serve to undermine the Pound in today’s session.
Pound Euro Exchange Rate Forecast: UK GDP to lift Sterling?
Looking ahead, the primary catalyst of movement for the Pound Euro exchange rate at the end of this week will likely be the UK’s latest UK GDP figures.
The data is expected to show that that the UK economy grew by 0.2% in November, recovering from a 0.3% drop in October.
If the figures match or exceed market expectations, this may ease UK recession fears and bolster Sterling sentiment.
Turning to the Euro, Eurozone data is thin on the ground tomorrow, with the exception of a speech from ECB policymaker, Phillip Lane. Should the central bank official strike a dovish tone during his address, this may hobble the Euro moving forward.