(Updated 14:35, 15/04/24) The pound euro (GBP/EUR) exchange rate held its ground as the session progressed following tepid commentary from European Central Bank (ECB) Chief Economist Philip Lane.
Coming off the back of the ECB’s dovish pivot during last week’s sixth consecutive interest rate hold, Lane reiterated the central bank’s data-driven approach and expressed confidence that inflation in the Eurozone is steadily approaching the ECB’s 2% target rate.
The ECB policymaker commented:
‘We will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction, and we are not pre-committing to a particular rate path. Wage pressures are gradually moderating but remain elevated compared to a steady-state benchmark.’
Meanwhile, a slight uptick in the US Dollar (USD) may have sapped further support from the euro, due to the currency pairing’s negative correlation.
At the time of writing, GBP/EUR is trading at €1.1722. This is up slightly from an earlier €1.1717 and up approximately 0.2% from its opening levels.
The focus moving forward is Germany’s latest ZEW economic sentiment index for April, with economists expecting the index to report increased optimism amongst leading German economists. Should the data print as forecast, the euro (EUR) may regain some investor support.
Tomorrow, the UK’s latest employment data is in the spotlight. Could steadily increasing unemployment spark concerns of a weakening British labour market?
Original article continues below:
Pound euro (GBP/EUR) exchange rate edges higher despite improving Eurozone production
The pound euro (GBP/EUR) exchange rate continues to trend higher this morning despite rebounding industrial production in the Eurozone, as market sentiment drives the currency pairing.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1717, up approximately 0.2% from this morning’s opening rate.
Euro (EUR) wavers despite industrial production rebound
The euro (EUR) is struggling to gain ground against its rivals this morning despite the latest industrial production data indicating a marginal recovery in the Eurozone.
Output recovered by 0.8% in February, following a revised 3% downturn in the month prior. The data aligned with market expectations, as the production of capital goods and durable consumer goods accelerated.
However, markets appear largely unmoved by the upbeat data, as the minor uptick indicated an ongoing trend of overall declining production throughout the first quarter of 2024.
Bert Colijn, Senior Economist at ING, said:
‘The manufacturing sector continues to be the Achilles’ heel of the eurozone economy. Production has been contracting for a while now, and the small February increase in production makes no marked difference to the recent trend. Thanks to the sharp drop in production in January, it is likely that production for the full first quarter has declined again compared to the fourth quarter of last year.’
Pound (GBP) wavers amid lacklustre GDP report
The pound (GBP) is mixed this morning as concerns about surmounting geopolitical tensions leave the increasingly risk-sensitive currency vulnerable to market volatility.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, observes this morning’s anxious market mood, noting that sentiment could remain cloudy amid growing feelings of unease.
Streeter said:
‘Investors are on alert for retaliatory action following Iran’s attack on Israel. Fears are brewing that a dangerous new episode of escalating conflict is about to roll. All eyes are on diplomatic efforts being made to diffuse the situation which have helped bring down a spike in oil prices.’
Ahead of Bank of England (BoE) commentary due later this morning, market risk dynamics could continue to drive GBP exchange rates amid a lack of fresh UK data.
Pound euro exchange rate forecast: ECB speech to drive volatility?
Coming up, a speech from ECB Chief Economist Philip Lane could imbue EUR exchange rates some volatility this morning. Coming off the back of the central bank’s dovish hold on interest rates last week, further suggestion that monetary unwinding lies around the corner for the Eurozone could serve to undermine the common currency as today’s session progresses.
Should Lane confirm market speculation that the ECB could begin its loosening cycle in June, the euro may struggle to garner investor interest.
Similarly for the pound, a speech from BoE policymaker Sarah Breeden could drive GBP exchange rates amid an absence of fresh UK data releases.
Like its euro counterpart, investors expect the BoE to lower its base rate in June. Should Breeden’s commentary suggest the same, GBP could slump against its rivals.
Otherwise, a lack of key releases throughout the session may see the pound euro exchange rate trade in accordance with a shifting market sentiment. As geopolitical tensions in the Middle East increase, cheery trading conditions could see GBP continuing to climb against its safer peers.