Pound euro (GBP/EUR) exchange rate flat despite dovish ECB meeting minutes
Article updated 16:26, 10/5/2024
The pound euro (GBP/EUR) exchange rate is remaining tepid this afternoon, despite the latest European Central Bank (ECB) meeting minutes ringing dovish.
The minutes showed that the ECB had begun to discuss an interest rate cut in June. The central bank confirmed that inflation was beginning to cool as expected.
Because of this, they appeared to begin to prepare for an interest rate cut in June, which is weighing on the euro.
The minutes stated:
‘It was seen as plausible that the Governing Council would be in a position to start easing monetary policy restriction at the June meeting if additional evidence received by then confirmed the medium-term inflation outlook embedded in the March projections.’
At the time of writing, GBP/EUR is trading at around €1.1619, showing little movement from today’s opening rates.
Original article continues below:
Pound euro (GBP/EUR) exchange rate unmoved by stronger-than-expected GDP data
The pound euro (GBP/EUR) exchange rate is wavering today, despite forecast-beating UK GDP data.
At the time of writing, GBP/EUR is trading at around €1.1623, showing little movement from today’s opening levels.
Pound (GBP) wavers despite forecast-beating GDP data
The pound (GBP) is struggling to capitalise on an emphatic exit from the recent UK recession this morning.
The UK economy managed to expand by 0.6% in the first quarter of 2024, above estimates of 0.4% growth.
However, GBP is seemingly unable to capitalise on the upbeat reading, as analysis of the UK’s economy skews pessimistic. While the UK is expected to grow by 1% in 2024, it has been noted by analysts that growth could remain slow in the near term.
Suren Thiru, Economics Director of the Institute of Chartered Accountants in England and Wales (ICAEW), commented:
‘The UK’s escape from recession is a rather hollow victory because the big picture remains one of an economy struggling with stagnation. The economy could struggle to kick on further in the second quarter as the boost to people’s incomes from weaker inflation is partly curtailed by renewed caution to spend and invest, amid higher unemployment and ongoing political uncertainty.’
Elsewhere, yesterday’s dovish interest rate from the decision could still be rippling through markets. With the prospect of a June rate cut from the Bank of England (BoE) on a coin-toss, Sterling may see its upside limited.
Furthermore, a mixed market mood could be further weighing on Sterling. As an increasingly risk-sensitive currency, the unclear tone to the day’s trade may be further capping its gains.
Euro (EUR) mixed ahead of ECB meeting minutes
The euro (EUR) is seeing mixed trade this morning, as investors await the latest European Central Bank (ECB) meeting accounts.
As the central bank has maintained its recent dovish tone, the meeting minutes are likely to reflect this.
Due to the expectation that the ECB may begin to cut interest rates before the Federal Reserve or Bank of England, any further hints of this may weaken the euro.
Thus far, the common currency is largely trading in tandem with existing market dynamics. This is likely due to a lack of other macroeconomic data releases, and a mixed market mood.
Pound euro exchange rate forecast: UK wage data in focus
Looking ahead for the pound, the main driver of movement may be the latest UK wage data, due Tuesday.
Average earnings excluding bonuses are forecast to have cooled to 5.9% in the three months leading to March. This could weaken Sterling as this has been considered one of the Bank of England’s key inflationary pressures and may suggest a need for looser monetary policy.
However, any losses could be offset by a hold in March’s unemployment rate. If this remained at 4.2%, it could suggest tightness in the UK labour market and strengthen Sterling.
For the euro, the core catalyst of movement may be the latest German ZEW economic sentiment index, due Tuesday.
In May, sentiment is expected to have risen from 42.9 to 45, which could strengthen the common currency.