Pound Euro (GBP/EUR) exchange rate strengthens as ECB rate cut bets soar
The Pound Euro (GBP/EUR) exchange rate is firming this morning following unexpectedly dovish commentary from the European Central Bank (ECB).
At the time of writing the GBP/EUR exchange rate is trading at around €1.1738, up approximately 0.3% from this morning’s opening rate.
Euro (EUR) slumps amid dovish ECB commentary
The Euro (EUR) is facing headwinds this morning following the latest comments from European Central Bank (ECB) policymaker, Mario Centeno.
Centeno struck an unexpectedly dovish tone this morning regarding monetary policy, deviating from the hawkish rhetoric adopted by various ECB’s policymakers in recent days.
The ECB rate-setter advocated that while inflation in the Eurozone continues to fall, a continual and gradual approach towards this year’s interest rate cuts offers a more sustainable method of enacting monetary policy, in the absence of renewed price shocks.
Centeno commented:
‘We can react later and more strongly, or sooner and more gradually. I am completely in favour of gradualism scenarios, because we have to give economic agents time to adapt to our decisions.’
Amid firmly dovish commentary, market expectations of imminent ECB interest rate cuts are serving to pressure EUR today. A souring Euro sentiment may continue to deter investors ahead of key data releases tomorrow.
Pound (GBP) wavers amid economic pessimism
The Pound (GBP) is quiet against most of its major peers this morning, as a lack of fresh economic data leaves Sterling vulnerable to the UK’s economic gloom and surmounting recession worries.
Consulting firm EY-Parthenon reported that the amount of firms issuing a profit warning last year surpassed the number of those that did during the financial crisis of 2008.
Almost 20% of firms were pushed into issuing the warnings, due to persistently high interest rates and weak UK confidence.
Jo Robinson, Partner at EY-Parthenon, noted:
‘Pervasive uncertainty in 2023 created major challenges for businesses around earnings and forecasting, and this is reflected in the number of profit warnings issued last year.’
An increasingly pessimistic economic outlook may undermine Sterling, ahead of further data releases later in the week. However, a spell of cautiously upbeat trade is serving to buoy the increasingly risk-sensitive Pound so far this morning.
Pound Euro exchange rate forecast: Euro to plummet under GDP data?
Looking ahead, the Eurozone’s latest GDP figures are due for release tomorrow morning. Economists expect the data will report negative growth in the third quarter, coming in at -0.1% for a second consecutive quarter. Should the data print in line with expectations, confirmation that the Eurozone fell into a technical recession last year amid two quarters of declining GDP may see EUR sentiment plummet.
In the interim, speeches from ECB policymakers could serve to drive Euro volatility. Later today a speech from Vice President Luis de Guindos could lift EUR, should Guindos strike hawkish. However, amid rapidly cooling Eurozone inflation and a loose economic outlook, the central bank’s hawkish rhetoric may fall on deaf ears.
Looking to the UK, a lack of notable data releases until the latter half of the week may see the increasingly risk-sensitive Pound Euro exchange rate left vulnerable to shifts in risk appetite, with upbeat trade potentially lifting GBP.