Pound euro (GBP/EUR) exchange rate fluctuates amid lull in fresh data
The pound euro (GBP/EUR) exchange rate is largely rangebound this morning amid a data-light calendar in both the Eurozone and the UK.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1871, virtually unchanged from this morning’s opening rate.
Pound (GBP) subdued amid absence of data
The pound (GBP) is moving without a clear trajectory this morning amid a lack of fresh UK data.
With data in short supply, deteriorating market sentiment deters investor interest in the increasingly risk-sensitive pound.
However, as markets continue to price in a less aggressive policy-easing cycle by the Bank of England (BoE), pared back interest rate cut bets may serve to keep Sterling afloat amid thin trading conditions.
Enrique Díaz-Alvarez, Chief Economist at Ebury, said:
‘The Bank of England is clearly in easing mode, although the resilience of the UK economy suggests that the pace of MPC rate cuts will be a gradual one.
Markets are assigning no more than a one-in-four chance of another cut from the BoE in September, though this may change should upcoming data on the labour market, GDP and inflation surprise expectations.’
As a result, GBP could hold its ground amid increased expectation of policy divergence amongst central banks in the coming months. However, a lack of immediate domestic drivers could signficiantly limit GBP movement for the time being.
Euro (EUR) undermined by rising rate cut speculation
The euro (EUR) is largely subdued this morning following a recent deluge of downbeat Eurozone data in recent weeks.
News of easing price pressures and continually weak growth in the bloc’s largest economy, paired with signs of decelerating inflation in the wider Eurozone has left EUR on the back foot in recent days.
This would suggest the central bank is slighlty lagging behind the curve with its rate reductions and stufling economic movement, supporting the case for further interest rate cuts in the near term.
The latest commentary from European Central Bank (ECB) policymaker Isabel Schnabel signalled that amid rapidly easing inflation across the bloc, the bank will likely amend its monetary policy soon to reflect cooling price pressures.
Schnabel stated:
‘Monetary policy should remain focused on bringing inflation back to our target in a timely manner. While risks to growth have increased, a soft landing still looks more likely than a recession.’
Elsewherem a souring market mood serves to keep the safe-have single currency afloat, as investors refrain from riskier currencies.
Pound euro exchange rate forecast: ECB speech in focus
Looking ahead, a speech from ECB policymaker Frank Elderson is due tomorrow morning. Should the rate-setter signal that a September interest rate cut remains appropriate within the bloc, EUR will likely stumble amid rising rate cut bets.
Elsewhere, finalised services PMIs are due for release in both the UK and Eurozone on Wednesday morning.
Confirmation that the UK’s vital services sector continues to rapidly expand may lend GBP support amid signs of continually robust activity in the British private sector.
Similarly, should the Euro area’s services PMI confirm strong growth in August, EUR could climb higher.