Pound euro (GBP/EUR) exchange rate muted in quiet trade
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning amid a lack of UK and Eurozone economic data.
At the time of writing, GBP/EUR is trading at around €1.1870, virtually unchanged from this morning’s opening levels.
Euro (EUR) holds steady following ECB comments
The euro (EUR) is holding steady against the majority of its peers this morning, marginally supported by dwindling European Central Bank (ECB) interest rate cut bets.
In an interview on Sunday, ECB Governing Council member Gabriel Makhlouf told the Irish Examiner that the central bank is in ‘no rush’ to cut rates, explaining:
‘There’s no need to actually rush to make decisions. We’ve got no predetermined rate path… We’re adopting a meeting-by-meeting approach’.
Following ECB President Christine Lagarde’s tepid comments last week in the wake of the central bank’s latest interest rate decision, Makhlouf’s contrasting viewpoint has aided the common currency this morning.
Pound (GBP) muted amid concerns over possible public sector pay increase
The pound (GBP) is trading sideways against the majority of its peers this morning as a result of limited domestic data/
Sterling is also muted after the new UK Chancellor Rachel Reeves, hinted that public sector workers could receive an above-inflation pay rise.
While Reeves said that there is ‘a cost to not settling’ pay negotiations, independent analysis from the Institute for Fiscal Studies (IFS) suggests that a potential 5.5% pay bump across the public sector would cost the government £10bn.
GBP investors fear this will place significant pressure on government finances if they continue to rule out any tax increases.
Pound euro exchange rate forecast: PMIs in the spotlight?
Looking ahead, the pound euro exchange rate could experience some movement towards the middle of the week following the publication of both the UK’s and the Eurozone’s preliminary PMI data.
Looking at the Pound, should the UK’s all-important services sector report that growth in the services sector began to accelerate again in July, GBP exchange rates may firm.
Turning to the Eurozone, the bloc’s index is forecast to show a mixed reading, with the services index expected to remain in the expansion territory (a reading over 50) while the manufacturing index is forecast to remain in contraction (a reading below 50), which could see the common currency waver following the release.
However, should either index show any surprise readings, GBP/EUR could experience significant volatility.
Also scheduled for release on Wednesday is Germany’s GFK consumer confidence index for the month ahead.
Following July’s reading, which missed forecasts and marked the first decline in a five-month period, will an expected uptick from -21.8 to -21.7 lift the single currency?
Or will another decline in consumer confidence in the Eurozone’s largest economy serve to undermine EUR exchange rates on Wednesday?
Until then, market mood will likely be the key driver for the pound/euro exchange rate. Should this morning’s downbeat trade prevail, GBP/EUR could start to tick lower.