Pound euro (GBP/EUR) exchange rate edges lower amid lack of data
The pound euro (GBP/EUR) exchange rate is on the back foot this morning amid a lack of both UK and Eurozone economic data.
At the time of writing, GBP/EUR is trading at around €1.1829, down roughly 0.2% from this morning’s opening levels.
Euro (EUR) wavers amid French political uncertainty
The euro (EUR) faces headwinds this morning as worries persist over France’s upcoming snap election.
Following his party’s defeat in the European elections earlier this month, French President Emmanual Macron’s called for a snap election at the end of June.
However, the move has spooked EUR investors, who are growing increasingly concerned that Macon’s election gamble may backfire and see him spend the rest of his term in ‘cohabitation’ with a parliament dominated by the far-right National Rally.
This is raising questions over France’s fiscal outlook, amid concerns a divided government could block Macron’s economic reforms while also posing a risk to France’s credit rating.
Chris Weston, analyst at Pepperstone, commented:
‘The evolving theme in French politics continues to see market players attempting to price risk and uncertainty around the future French fiscal position and what this could mean for France’s credit rating, and the cost to fund a wider deficit.’
Pound (GBP) muted ahead of high impact data
The pound (GBP) is treading water against the majority of its peers this morning, amid a lack of UK economic data and a prevailing risk-off market mood.
GBP investors may also be reluctant to place any aggressive bets ahead of some high impact domestic data later in the week.
On Wednesday, the UK’s latest inflation data will likely infuse volatility into the Pound whilst Thursday’s upcoming Bank of England (BoE) interest rate decision will also be a focus for GBP investors.
Until then Sterling sentiment is likely to remain limited and trade without a clear direction.
Pound euro exchange rate forecast: UK data to drive movement?
Looking ahead, the likely catalyst of movement for the pound euro exchange rate this week will be a duo of impactful data from the UK.
On Wednesday, the UK’s latest consumer price index is forecast to report headline inflation cooled to 2% in May, returning it to the BoE’s target for the first time since July 2021.
If this proves correct it may weigh heavily on Sterling as it likely to stoke BoE rate cut bets.
On Thursday, the UK’s central bank will deliver its interest rate decision. No policy changes are expected this month and as the UK general election is looming, the bank’s forward guidance will likely be limited, which may disappoint GBP investors.
Turning to the Euro, Tuesday will see the publication of Germany’s latest ZEW economic sentiment index.
As June’s reading is expected to confirm another uptick in sentiment, this could lend the common currency some modest support during tomorrow’s European session.