Pound euro (GBP/EUR) exchange rate muted as UK recession confirmed
The pound euro (GBP/EUR) exchange rate is wavering this morning, following confirmation that the UK entered a technical recession.
At the time of writing, GBP/EUR is trading at around €1.1681, showing minimal movement from the morning’s opening rates.
Pound (GBP) stifled by confirmation of UK recession
The pound (GBP) is being restricted this morning, following confirmation that the UK entered a technical recession.
The fourth quarter of 2023’s final GDP data print remained unchanged from preliminary readings, showing a second consecutive economic contraction.
Furthermore, this showed that the UK’s economy only grew by a meagre 0.1% over the entirety of 2023.
The Office for National Statistics (ONS) commented that:
‘GDP is estimated to have increased by an unrevised 0.1% in 2023, following growth of 4.3% in 2022. Excluding the year 2020, which was affected by the coronavirus (COVID-19) pandemic, this is the weakest annual change in real GDP since the financial crisis in 2009.’
Elsewhere, a risk-averse market mood is serving to induce additional volatility in the pound this morning.
While the bearish impulse is pressuring GBP against safer assets, it is allowing it to gain ground against more risk-sensitive currencies.
Euro (EUR) mixed amid variable German economic data
The euro (EUR) is enduring rocky trade this morning, amid mixed German data releases.
This morning, German retail sales in February unexpectedly slumped by 1.9% on a monthly basis.
This marked the fourth consecutive drop in sales, indicating that consumer spending still remains weak in the Eurozone’s largest economy.
However, this is being offset by a hold in German unemployment. In March, the unemployment rate held at 5.9%, with the number of unemployed persons only increasing by 4000, as opposed to the 10,000 expected.
Destatis, the Federal Statistical Office, reported:
‘According to provisional calculations of the Federal Statistical Office (Destatis), the seasonally adjusted number of persons in employment rose slightly by 14,000 (0.0%) compared with the previous month. In January 2024, the number of persons in employment was up by 56,000 month on month.’
Elsewhere, European Central Bank (ECB) interest rate cut bets are likely to be pressuring EUR this morning. Markets now price in an 85% chance of a rate cut in June, compared to a smaller chance of a rate cut from the Federal Reserve.
Pound euro exchange rate forecast: Market closures to limit movement?
Turning to tomorrow for the pound, Easter market closures are likely to result in minimal directional trade.
With liquidity thin, Sterling may trade in tandem with other market dynamics. If trading conditions improve, then the increasingly risk-sensitive pound could gain ground against safer assets such as the euro.
The same is true for the common currency, with markets being closed in observance of the holiday.
However, due to EUR’s negative correlation to the US dollar, it may see some volatility following the release of the latest core PCE price index. If US core inflation remained unchanged in February, EUR could slip.