Pound Euro (GBP/EUR) exchange rate hits five-day low amid data lull

Pound Euro (GBP/EUR) exchange rate wavers near five-day low amid warming rate cut bets

The Pound Euro (GBP/EUR) exchange rate is trending lower this morning, wavering near a five-day low amid a lack of fresh economic data releases.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1673, virtually unchanged from this morning’s opening rate.

Pound (GBP) volatile amid UK economic gloom

The Pound (GBP) continues to face headwinds this morning, as a sparsity of economic data leaves investors recalling last week’s bleak GDP figures and milder-than-anticipated inflation report.

With the odds of Bank of England (BoE) rate-setters delivering summer interest rate cuts soaring to 70%, the central bank faces renewed pressure to begin loosening monetary policy, amid concerns that persistently high interest rates could push the UK further into domestic recession.

Andy Haldane, former Chief Economist at the Bank of England, affirmed such fears yesterday, arguing that continually restrictive monetary policy could apply long-term damage to the UK economy.

Haldane stated:

‘For me the case for putting in place some upfront, early insurance on the monetary policy side is strong and strengthening, and I’m fearful we leave that insurance a little too late in the year.’

As worries about the health of the UK economy and surmounting rate cut bets weigh heavy on Sterling this morning, investors will likely avoid placing any hasty bets for the time being. Further commentary from BoE Governor Andrew Bailey may drive additional volatility later this morning.

Euro (EUR) wavers amid economic pessimism

The Euro (EUR) is trading without a clear direction this morning with notable Eurozone data in short supply.

Amid a lack of fresh trading impetus, investors appear hesitant to place any aggressive bets on the common currency in the wake of downbeat commentary from Germany’s central bank.

The Bundesbank, provided a dismal projection for the Eurozone’s largest economy, stating:

‘There is still no recovery for the German economy. Output could decline again slightly in the first quarter of 2024. With the second consecutive decline in economic output, the German economy would be in a technical recession.’

Pound Euro exchange rate forecast: central bank commentary to drive movement?

Looking ahead, a lack of immediate data may leave the Pound Euro exchange rate vulnerable to further commentary from central bank policymakers.

In the UK, BoE dove Swati Dhingra is due to speak tomorrow afternoon. As the only rate-setter to vote for a cut during the central bank’s latest interest rate decision meeting, investors may expect Dhingra to advocate for looser monetary policy once again. This will likely propel surmounting BoE rate cut speculations, thereby denting GBP amid a lack of notable data.

Looking to the Eurozone, speeches from both Anneli Tuominen and Edouard Fernandez-Bollo could influence EUR movement on Wednesday amid a lack of notable data. While markets are currently betting on June rate cuts, any dovish rhetoric from the ECB policymakers could pressure the common currency.

For the remainder of today’s session, the currency pairing may see muted movement with data in short supply. However, a shift towards cheery trade could see the increasingly risk-sensitive Pound take precedent over the safe-haven Euro.

Yasmine Arasteh

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