Pound euro (GBP/EUR) exchange rate wavers amid unchanged Eurozone inflation bets
The pound euro (GBP/EUR) exchange rate is changeable this morning despite news of stubborn inflation expectations in the Eurozone.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1855, virtually unchanged from this morning’s opening rate.
Euro (EUR) subdued as inflation expectations hold steady
The euro (EUR) is largely rangebound this morning despite the latest consumer inflation expectations release printing higher-than-forecast.
Inflation expectations remained unchanged at 2.8% in the Euro bloc in June, holding at their lowest levels since September 2021, according to a survey by the European Central Bank (ECB).
However, economic growth projections dropped to -0.9% in June, from a reading of -0.8% in May. As such, slumping economic morale across the Euro area may hamper EUR exchange rates as the session progresses.
Meanwhile, the common currency could remain listless ahead of this afternoon’s high-impact US releases.
Pound (GBP) wobbles amid data lull
The Pound (GBP) is largely subdued this morning amid an absence of fresh UK releases.
With data in short supply, Bank of England (BoE) interest rate bets are pulled into focus once again.
While a recent poll from Reuters showed that a majority of economists surveyed favour August for the central bank’s first interest rate reduction, markets still remain somewhat split over whether the BoE will defer any monetary loosening until later in the third quarter.
Andrew Goodwin, Chief UK Economist at Oxford Economics, is amongst those who maintain that the BoE will likely delay its first rate move until September. Analysts have suggested that signs of economic recovery in Britain coupled with investors hawkish reaction to June’s inflation print may provide the central bank with more scope to delay any monetary loosening during its policy meeting next week.
Goodwin commented:
‘The conditions are in place for the MPC to cut, but we think they will wait until September to avoid surprising markets.’
With markets pricing in a 50% likelihood of an August rate cut, investors may remain reluctant to place any aggressive bets on Sterling amid monetary policy uncertainty and a lack of wider releases today.
Pound euro exchange rate forecast: US data in focus
Looking ahead, a lack of fresh data in both the Eurozone and the UK this afternoon could see the latest US inflation data take the spotlight.
The market-moving core PCE price index is due for release later today. Serving as the Federal Reserve’s preferred gauge of inflation, the index is due to cool to 2.5%, dipping from a previous reading of 2.6%.
Should the index print as forecast, increased expectations that the Fed could begin its unwinding cycle during the third quarter may drive notable market volatility. Ramped-up bets of a Fed September rate cut could sink the ‘greenback’, thereby boosting EUR, due to its negative trading relationship with USD.
Elsewhere, the data could influence global risk dynamics, with any bullish trade likely to lift the increasingly risk-sensitive pound against its safe-haven peers.