Pound euro (GBP/EUR) exchange rate wavers near ten-day low amid surmounting rate cut expectations 

Pound euro (GBP/EUR) exchange rate wobbles ahead of Eurozone retail data

The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning ahead of the Eurozone’s latest retail sales figures.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1649, virtually unchanged from this morning’s opening rate.

Euro (EUR) wavers following tepid ECB commentary

Amid a data-light opening to the session, the euro (EUR) is mostly subdued against its major peers this morning.

Ahead of the Eurozone’s high impact retail data, due for release mid-morning today, the European Central Bank’s (ECB) latest meeting minutes pressure the common currency.

The minutes showed no significant deviation from recent central bank commentary and reinforced market speculations of a June interest rate cut in the Euro area. While policymakers expressed a preference for monetary loosening to begin in June rather than April, the commentary was largely tepid overall, thereby leaving EUR to trade narrowly into today’s session.

An excerpt from the ECB’s notes stated:

‘Members expressed increased confidence that inflation was on track to decline sustainably to the 2% inflation target in a timely manner. While it was wise to await incoming data and evidence, the case for considering rate cuts was strengthening.’

Additionally, a strengthening US dollar (USD) seems to further limit EUR’s movements this morning, due to the currency pairing’s negative correlation. However, should USD weaken later today, EUR may gain ground.

Pound (GBP) falters amid absence of data

The pound (GBP) is edging lower this morning amid an ongoing lull in UK economic data as the week draws to a close.

Amid a lack of macroeconomic releases, markets continue to place their bets on a June interest rate cut from the Bank of England (BoE), pricing in a total of four interest rate cuts this year.

Supporting the case for imminent monetary unwinding is the BoE’s latest Decision Maker Panel (DMP) survey for February. The report showed that a majority of UK companies expect wage inflation and selling prices to begin easing over the next year.

Notably, selling price expectations slowed from 4.3% to 4.1%, marking the lowest reading in over two years. In addition, wage inflation expectations also decelerated to 4.9% in February.

Amid confirmation of easing inflation expectations, UK economic sentiment solidifies the case for summer interest rate cuts. As such, GBP may continue to face headwinds through today’s session as thin trading conditions and ramped up BoE rate cut bets curb the currency’s upside.

Pound euro exchange rate forecast: Eurozone retail sales to dent EUR?

Coming up, the key catalyst of EUR movement this morning will likely be the Eurozone’s latest retail sales data.

Economists expect to see a slump in retail activity, with a 0.4% decline in February. A return to contraction after January’s minor 0.1% increase may therefore sink the euro, as concerns of continually weak consumer spending in the Euro area dent the common currency.

Otherwise, for the pound, an ongoing lull in UK data may see Sterling trade without a clear direction against its major rivals. Accordingly, the increasingly risk-sensitive pound could move according to risk appetite. A cheery spell of trade may therefore boost GBP against its safer peers.

Elsewhere, high impact American data this afternoon could imbue the pound euro currency pairing with additional volatility. The typically market moving US non farm payrolls are due for release, with economists forecasting a notable slump in the number of jobs added by the US economy.

Yasmine Arasteh

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