GBP/EUR exchange rate trends up amid bearish euro trade
The pound euro (GBP/EUR) exchange rate continues to trade higher today despite pound (GBP) weakness across other exchange rates. The euro (EUR) likewise comes under pressure as traders forecast an imminent interest rate cut from the European Central Bank (ECB).
At the time of writing, GBP/EUR is trading at €1.1877, having firmed by almost 0.3% in the past 24 hours.
Euro (EUR) slumps as markets price in September cut
The euro is sliding against its peers today as investors face the increasing likelihood of in interest rate cut from the ECB in September.
Prompting expectations of monetary policy loosening are August’s PMI data and Q2 wage statistics, which indicate an uncertain economic outlook ahead. Activity slowed across the manufacturing and service sectors this month in the bloc’s largest economy, while negotiated wage growth printed below forecasts.
A rate cut is not yet certain, however – despite market sentiment. Dutch ECB policymaker Klaas Knot commented yesterday that:
‘I will have to wait until I have the full data and information set going into that meeting to decide my position on whether September is appropriate.’
Regardless of policymakers’ comments, markets also expect a second interest rate cut before the end of the year.
Elsewhere, factors potentially influencing EUR trade include recent domestic data and US dollar (USD) performance. While Germany’s Ifo business climate indicator surpassed forecasts on Monday, Gfk consumer confidence subsequently disappointed. Moreover, strong US confidence data may have emboldened ‘Greenback’ traders, pressuring the negatively-correlated euro.
Pound (GBP) trades mixed as investors await BoE speech
The pound is trading in a mixed range today, climbing against the euro but weakening against several other peers. Dampening support for the currency may be trepidation ahead of policymaker Catherine Mann’s speech this afternoon.
Markets currently expect that the Bank of England (BoE) will ease off restrictive policy measures at a slower pace than other central banks, given the strong performance of the UK economy. Governor Andrew Bailey supported this assessment last Friday, when he said:
‘The second-round inflation effects appear to be smaller than we expected. But it is too early to declare victory… [the BoE will] be careful not to cut interest rates too quickly or by too much.’
Nevertheless, Mann’s comments later today could challenge this impression, leaving traders in a bearish mood.
A lack of significant UK data today leaves Sterling with little else to trade upon. The distributive trades index from the Confederation of British Industry (CBI) printed below forecasts yesterday at –27, marking the second-lowest reading since April; the release appeared to prompt modest headwinds.
GBP/EUR exchange rate forecast: Mann speech in focus
The pound euro exchange rate is likely to trade later today upon the comments of BoE policymaker Catherine Mann. A known hawk, her speech is likely to strike a bold tone; anything less could inspire GBP headwinds.
Elsewhere, USD dynamics could trigger movement in euro exchange rates. Federal Reserve Atlanta President, Raphael Bostic, is due to speak this evening – ahead of the event, US dollar jitters could spark EUR tailwinds.
Tomorrow, German inflation data and economic sentiment in the Eurozone are likely to take centre stage. If inflation eases as expected in the bloc’s largest economy, ECB rate cut forecasts could firm, weakening the single currency.