Pound euro (GBP/EUR) exchange rate ticks up as market sentiment improves
The pound euro (GBP/EUR) exchange rate is inching higher this morning as investors opt for riskier currencies.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1691, up approximately 0.2% from this morning’s opening rate.
Euro (EUR) wavers despite stubborn German inflation
The euro (EUR) is trading without a clear direction this morning despite signs of sticky inflation in the Eurozone’s largest economy.
Germany’s latest batch of inflation data confirmed an annual rise to 2.3% in July, inching up from the previous month’s reading of 2.2%.
Destatis, the German Federal Statistics Office, noted that easing energy prices continue to dampen domestic inflation, while above-average prices across the vital services sector applies upward pressure to the German consumer price index (CPI).
Frederik Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management commented:
‘We just got the macro projections from euro National Central Banks. In June and in December, ECB projections are produced jointly by NCBs and ECB staff. The upward revision to 2025 inflation projections has been almost entirely driven by Germany, the Netherlands, and Belgium.’
While the European Central Bank (ECB) has been widely expected to move in tandem with other major central bank’s through the remainder of the year, signs that inflation throughout the Eurozone continues to waver just above the central bank’s 2% target rate may lend EUR support as the session progresses.
Elsewhere, ongoing market turbulence may serve to impact EUR movement, with an extended recovery in market sentiment likely to leave the single currency exposed to losses.
Pound (GBP) inches higher amid cheery trade
The increasingly risk-sensitive pound (GBP) is posting modest gains against its safe-haven rivals this morning amid an ongoing recovery in global market sentiment.
However, Sterling’s upside potential will likely remain limited today, as a lack of UK data and firming Bank of England (BoE) interest rate cut bets weigh on GBP.
A turbulent start to the week pulled US recession woes into view, leading to a surge in BoE rate cut bets. Despite the bank’s somewhat hawkish rate reduction last week, markets are now pricing in an additional two cuts by December.
Alex Kuptsikevich, senior market analyst at FxPro, commented:
‘The British Pound has been under increased pressure over the past few weeks, facing serious resistance as it tries to break important long-term levels against the Dollar and Euro.
The most important reason for the pressure on the pound is monetary policy, as the Bank of England swiftly eased policy in response to falling inflation.’
Elsewhere, after hitting multi-week lows against some of its peers this week’s major selloff, investors could seek to pick up a bargain and buy the oversold pound.
Pound euro exchange rate forecast: risk appetite to drive movement?
Looking ahead, a data-light start to the week could see the pound euro exchange rate left vulnerable to global risk dynamics once again.
Any bullish trade will likely lift the increasingly risk-sensitive pound against its safer rivals. Alternatively, a downbeat market sentiment could underpin the safe-haven euro.