Pound euro (GBP/EUR) exchange rate muted despite upbeat Eurozone data

Pound euro (GBP/EUR) flat amid risk-on flows

(Updated 16:15, 15/05/24) The pound euro (GBP/EUR) exchange rate has been trapped in a narrow range for most of the afternoon.

The pound (GBP) is enjoying some modest support thanks to today’s cautiously upbeat market mood. As an increasingly risk-sensitive currency, Sterling is managing to strengthen against the majority of its peers this afternoon.

However, the euro (EUR) is failing to attract investor attention this afternoon, undermined by its safe-haven status.

At the time of writing, GBP/EUR is trading at around €1.1649, virtually unchanged from today’s opening levels.

Original article continues below:

Pound euro (GBP/EUR) exchange rate ticks up despite better-than-expected Eurozone industrial production

The pound euro (GBP/EUR) exchange rate is edging higher this morning following the release of the Eurozone’s latest industrial production figures.

At the time of writing, GBP/EUR is trading at around €1.1657, up roughly 0.2% from this morning’s opening levels.

Euro (EUR) struggles despite positive industrial production figures

The euro (EUR) is struggling to hold its ground against its peers this morning, despite the release of some better-than-expected Eurozone data.

The Eurozone’s latest industrial production figures beat forecasts in March, printing at 0.6% rather than a more modest expectation of 0.5% and marked a second consecutive month of growth.

The euro is also struggling this morning in spite of the Eurozone’s second estimate of GDP for the first quarter of the year.

The figure confirm that the Eurozone escaped its technical recession at the end of last year, following a 0.3% expansion of growth in the first three months of 2024.

However this failed to translate into support for the single currency in the face of risk-on flows.

Pound (GBP) demand tempered by BoE rate cut bets

The pound (GBP) is supported by a risk-positive market mood this morning, however these gains remain limited in scope morning amid ongoing Bank of England (BoE) interest rate cut speculation.

Following yesterday’s disappointing UK labour data, which reported that unemployment in the UK reached an eight-month high in March, markets have been speculating over the timing of the central bank’s first interest rate cut.

Money markets are now pricing in an over 50% chance that the BoE will begin loosening its monetary policy in June following some dovish commentary from the central bank’s Chief Economist Huw Pill yesterday afternoon.

Pill said:

‘I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration. There has been an easing of the labour market but it still remains pretty tight by historical standards.’

This continued to undermine Sterling sentiment this morning amid a lack of any notable UK economic data.

Pound euro exchange rate forecast: risk appetite to drive movement?

Looking ahead, the primary driver of movement for the pound euro exchange rate for the remainder of the week will likely be market mood.

As both UK and Eurozone economic data will be thin of the ground through the second half week, the currency pairing is likely to be driven by market appetite for risk.

Should a more downbeat mood prevail this week, the pound euro exchange rate is likely to drift lower, however, should markets engage in more positive trading conditions, the currency pairing could strengthen.

The only notable data release this week will come in the form of the Eurozone’s finalised inflation data. Any deviation from the expected results could see EUR exchange rates slip.

Sarah Ebrahem

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