Pound euro (GBP/EUR) exchange rate remains trading near three-week high

Pound euro (GBP/EUR) muted amid continued lack of data

(Updated 16:30, 21/05/24) The pound euro (GBP/EUR) exchange rate has remained trapped in a narrow range moving into the afternoon’s session amid a further absence of economic data.

The pound (GBP) could experience volatility later today as Bank of England (BoE) Governor Andrew Bailey is expected to deliver a speech.

Should Bailey touch on monetary policy and imply that interest rates could be cut sooner rather than later, the pound may struggle to catch bids.

The euro (EUR) has also remained mostly subdued this afternoon amid a lull in Eurozone data and is being further undermined by this afternoon’s mixed market mood.

As markets remain unclear, the safe-haven currency is struggling to garner investor attention moving into this afternoon.

At the time of writing, GBP/EUR is trading at around €1.1715, virtually unchanged from today’s opening levels.

Original article continues below:

Pound euro (GBP/EUR) exchange rate muted following slide in German PPI

The pound euro (GBP/EUR) exchange rate is trading sideways this morning after another side in German producer prices last month.

At the time of writing, GBP/EUR is trading at around €1.1694, virtually unchanged from this morning’s opening levels.

Euro (EUR) struggles amid German PPI disappointment

The euro (EUR) is struggling to find support this morning following the publication of Germany’s latest producer price index.

April’s PPI figures reported that the contraction in producer prices accelerated. Year-on-year prices slowed from -2.9% to -3.3% against forecasts for a more modest decline to 3.2%.

This marked the tenth consecutive month of producer deflation amid a sharp drop in energy prices over the past year.

As producer prices generally feed through to consumer in subsequently months, this is dragging on the euro this morning as it signals that inflation in the Eurozone’s largest economy is likely to continue to cool. Potentially placing more pressure on the European Central Bank (ECB) to loosen its monetary policy.

Pound (GBP) undermined by slowing grocery inflation

The pound (GBP) is trading in a narrow range this morning as a lack of economic data has seen Sterling struggle to find a clear direction.

Amid a lull in macroeconomic data, GBP investors cast their eye to the latest retail data from group Kantar released earlier this morning.

Kantar reported that grocery inflation fell to a two and a half year low in April, its lowest level since October 2021.

Fraser McKevitt, Head of Retail and Consumer Insight at Kantar, commented:

‘Typically, an inflation rate of around 3% is when we start to see marked changes in consumers’ behaviour, with shoppers trading down to cheaper items when the rate goes above this line and vice versa when the rate drops.

However, after nearly two-and-a-half years of rapidly rising prices, it could take a bit longer for shoppers to unwind the habits they have learnt to help them manage the cost-of-living crisis.’

The latest grocery data comes just a day ahead of the UK’s latest inflation data, expectations for which appear to be limiting seen GBP movement today.

Pound euro exchange rate forecast: Slowing UK inflation to dent Sterling?

Looking ahead, the primary driver of movement for the pound euro exchange rate this week will be the UK’s consumer price index (CPI), scheduled for release tomorrow.

The latest inflation figures are forecast to show that both headline and core inflation cooled in April.

However, with deceleration in the UK’s headline figure expected to print just above the Bank of England’s 2% target, this is likely to undermine GBP exchange rates as it may cement current interest rate cut bets for June.

Turning to the euro, the most significant data release this week will come in the form of the Eurozone’s latest PMI data, scheduled for release on Thursday.

Both services and manufacturing sector activity  are expected to increase in May, with the services index expected to rise from 53.2 to 53.5, while the manufacturing index is expected to rise from 45.7 to 46.6.

Will signs of a more robust private sector buoy the single currency towards the latter stages of the week?

Sarah Ebrahem

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