GBP/EUR exchange rate subdued following Eurozone GDP
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning despite the publication of some forecast beating GDP data from within the Eurozone.
At the time of writing, GBP/EUR is trading at around €1.1871, virtually unchanged from this morning’s opening levels.
Euro (EUR) holds steady following GDP
The euro (EUR) is holding steady against the majority of its peers this morning following the publication of some better-than-expected Eurozone GDP data.
The preliminary reading for the second quarter of the year reported that growth expanded by 0.3% quarter on quarter, ahead of a more modest 0.2% expectation and in line with the first quarter’s 0.3% expansion.
However, despite the upbeat reading, EUR exchange rates have remained mostly muted in the wake of the release, as it hasn’t shifted expectations regarding a September interest rate cut from the European Central Bank (ECB).
The single currency has also been hobbled by this morning’s positive market mood. As markets opt for riskier assets, the safe-haven single currency is struggling to garner investor attention.
Pound (GBP) stable following speech from UK Chancellor
The pound (GBP) has managed to recoup some of yesterday’s losses following reports of a £22bn ‘black hole’ in the UK’s public finances.
In the wake of the report, Sterling sentiment weakened as investors worried over potential new tax plans to plug the hole, and the overall health of the UK’s finances.
However, UK Chancellor Rachel Reeves addressed the House of Commons later in the day and ruled out any new tax plans ahead of the Autumn budget, which has seen GBP stay afloat moving into today’s European session.
As part of her address, Reeves said:
‘This level of overspend is not sustainable. Left unchecked, it is a risk to economic stability and, unlike the party opposite, I will never take risks with our country’s economic stability.’
Elsewhere, domestic macroeconomic data will remain scarce until Thursday’s Bank of England (BoE) interest rate decision, and will likely see Sterling movement largely limited until then.
Pound euro exchange rate forecast: BoE interest rate decision in the spotlight
Looking ahead, the primary catalyst of movement for the pound euro exchange rate for the remainder of this week will be the Bank of England’s upcoming interest rate decision, scheduled for Thursday afternoon.
As a BoE interest rate cut is on a knife’s edge, with roughly 50% of investors pricing in a 25-basis point cut against the 50% who expect the central bank to leave rates on hold, GBP/EUR is likely to experience volatility following the meeting and accompanying press release.
Before that and looking at the euro, Wednesday will see the publication of the Eurozone’s preliminary inflation reading for July.
The data is expected to report that both headline and core inflation are edging closer towards the European Central Bank’s (ECB) target, and could undermine EUR exchange rates in mid-week trade.