Pound euro (GBP/EUR) exchange rate rangebound ahead of high impact US data
The pound euro (GBP/EUR) exchange rate is trading without a clear direction this morning as markets anticipate this afternoon’s weighty inflation release.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1656, virtually unchanged from this morning’s opening rate.
Pound (GBP) wavers amid data lull
The pound (GBP) is subdued this morning amid a lack of macroeconomic releases.
Bullish trading conditions serve to buoy GBP against its safer rivals, while allowing its more risk-sensitive peers to take precedent.
Elsewhere, new data from the Office for National Statistics (ONS) reports that the UK’s cost-of-living crisis remains one of the most important issues to date affecting British citizens. Of those surveyed, 87% of people stated that they continued to struggle amid high UK price pressures and a lack of cashflow.
With fresh data in short supply, economic pessimism may serve to dampen investor interest in GBP as the session continues.
Euro (EUR) fluctuates despite hawkish ECB comments
The euro (EUR) is struggling to garner investor interest this morning as a data-light end to the week saps appeal for the common currency.
As such, investors look back on the latest European Central Bank’s (ECB) commentary, as ramped up interest rate cut bets continue to stymie EUR’s movements. Policymakers suggested that markets are currently pricing in too many interest rate cuts for the year ahead, which could lend EUR some marginal support as the session progresses.
ECB policymaker Madis Muller told Econostream in an interview yesterday:
‘That’s why it’s reasonable to start with a 25 bp cut in June, and thereafter to see how actual developments look in terms of inflation, growth and all the other key variables before taking our next decision based on these. Especially as we are starting with rate cuts while inflation is still above our target.’
ECB policymaker Isabel Schnabel also warned of a ‘bumpy last mile’ in the central bank fight against inflation. However, firmly placed rate cut expectations could serve to undermine any policymaker divergence, leaving EUR ultimately flat as the session nears an end.
Pound euro exchange rate forecast: US data to drive market volatility?
Looking ahead, both UK and Eurozone data is in short supply for the remainder of the day.
However, high impact American inflation data may serve to drive the pound euro exchange rate this afternoon.
The core PCE price index is due for release, with markets forecasting a reading of 2.6% in March’s year-on-year figures, up from the previous month’s 2.5%. Should the data print as forecast, warming US inflation could spark global market volatility.
Signs that the Federal Reserve could maintain higher interest rates for longer this year may see investors favour safe-haven currencies, which in turn could dent the increasingly risk-sensitive pound. Alternatively, any deviations from market forecasts could see bullish trading conditions boost Sterling against its safer rivals.
In addition to this, any notable lift in the US dollar (USD) could result in a weakened euro, due to the currency pairing’s negative correlation.