Pound Euro (GBP/EUR) exchange rate subdued despite rebound in UK growth
The Pound Euro (GBP/EUR) exchange rate is trapped in a narrow range this morning. As GBP investors appear to shrug off stronger-than-expected UK GDP figures.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1634, virtually unchanged from this morning’s opening rate.
Pound (GBP) wobbles despite better-than-expected GDP
The Pound (GBP) is on the back foot this morning, despite UK GDP data printing above market expectations.
The figures showed that the UK economy returned to growth, reporting a 0.3% increase in November, jumping up from a 0.3% contraction the month prior, and slightly above market expectations of a 0.2% rise.
While the data beat expectations, Sterling sentiment weakened as analysts warned that the UK economy is still at risk of having slipped into a recession at the end of 2023.
The figures also appeared to stoke speculation that the Bank of England (BoE) may need to cut interest rates earlier than previously expected.
Head of Fixed Interest Research at Quilter Cheviot, Richard Carter, comments:
‘This morning’s figure shows just how precarious the situation is for the UK economy and piles yet more pressure onto the Bank of England to cut interest rates. The Bank has managed not to tip the UK into a recession to date, but it is looking increasingly likely that its luck may be coming to an end.’
Euro (EUR) weakens on upbeat market mood
The Euro (EUR) is edging lower against most of its peers today, as a surprisingly cheery market mood serves to undermine the safer single currency.
With recent tensions in the Middle East continuing to mount, today’s surprise increase in risk appetite may be due to better-than-expected Chinese inflation and trade data.
Later today, the European Central Bank’s (ECB) Chief Economist, Philip Lane, is expected to deliver a speech regarding the Eurozone’s outlook for the upcoming year.
Should Lane echo his colleagues in attempting to dispel rumours of looming interest rate cuts, the European currency could strengthen throughout today’s session.
Pound Euro Exchange Rate Forecast: Slump in German GDP to Drag on EUR?
Looking ahead, the Pound Euro exchange rate could strengthen at the start of next week with the publication of Germany’s latest GDP figures.
The data is expected to report that Germany’s economy contracted in 2023 as a whole. A slump in the Eurozone’s largest economy is likely to weigh on EUR exchange rates, especially as its likely to place more pressure on the ECB to begin cutting interest rates.
This will be followed by Germany’s latest economic sentiment index on Tuesday. Could another uptick in morale help the Euro to quickly bounce back from any GDP driven losses?
Turning to the Pound, the focus for GBP investors in the first half of next week will be the publication of the UK’s latest jobs report. Could an expected cooling of wage growth in November bolster BoE rate cut bets and sap Sterling sentiment?