Pound Euro (GBP/EUR) exchange rate fluctuates amid Eurozone recession concerns
The Pound Euro (GBP/EUR) exchange rate is trading without a clear trajectory this morning as German GDP data fuels economic anxieties.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1628, virtually unchanged from this morning’s opening rate.
Euro (EUR) stumbles on disappointing GDP data
The Euro (EUR) is volatile this morning following the release of Germany’s disappointing GDP data.
German GDP printed in line with expectations this morning, reporting a 0.3% contraction throughout 2023. The data marked a significant decline from economic activity in 2022, and cemented suspicions that Germany fell into recession last year.
Carsten Brzeski, Global Head of Macro at ING, offered a startlingly bleak outlook for the Eurozone’s largest economy:
‘There is no imminent rebound in sight and the economy looks set to go through the first two-year recession since the early 2000s.
The year 2023 was another turbulent one, with the economy in permanent crisis mode.’
Also denting EUR this morning is a third consecutive contraction in the Eurozone’s industrial production, which fell by 0.3% in November.
However, a surge in the Eurozone’s trade surplus looks to be capping the common currency’s losses, after today’s trade data reported a widening to €20.3 billion, smashing expectations of €11.1 billion.
Investor interest in the common currency may dwindle as today’s session continues, while markets digest the mixed data. Confirmation of stark economic weakness in Germany as well as the wider Euro area may serve to significantly limit EUR’s upside potential.
Pound (GBP) wavers amid data deficit
The Pound (GBP) is trading without a clear direction this morning amid a lack of notable UK releases, as economic uncertainty clouds investor interest in the increasingly risk-sensitive Pound.
Following last week’s lacklustre GDP report, investors remain hesitant to bet on Sterling amid a lull in further economic data releases today. While recent data paints an increasingly bleak picture for the health of the UK economy, surmounting recession fears serve to undermine Sterling sentiment today.
Sandra Horsfield, an economist at Investec noted that
‘It remains touch-and-go whether the economy tipped into a technical recession in the second half of 2023. In either case, a better description of the trend might be stagnation. The recession, if it did occur, looks to have been as mild as they come.’
Pound Euro exchange rate forecast: falling UK employment to dent GBP?
Looking ahead the UK’s latest employment data is due for release tomorrow and is likely to be the core catalyst of GBP volatility. Economists expect to see a slight uptick in UK unemployment, hitting 4.3% in November of last year.
Also due for release is UK wage growth data. Average earnings are forecast to have declined in October’s three-month average reading, hitting a six-month low. Signs of a loosening labour sector could leave GBP on the defensive for much of Tuesday’s session.
Turning to the Eurozone, Germany’s ZEW economic sentiment index is due out and may drive significant EUR volatility. In the wake of today’s discouraging GDP report, further economic anxieties within the report could prompt investors to resize European Central Bank (ECB) interest rate cut bets amid a sluggish economy, serving to stymie the Euro.