Pound euro (GBP/EUR) exchange rate wavers amid lull in data
The pound euro (GBP/EUR) exchange rate is moving without a clear direction this morning amid an absence of fresh releases.
At the time of writing the GBP/EUR exchange rate is trading at around €1.18538, virtually unchanged from this morning’s opening rate.
Pound (GBP) rangebound amid sparsity of data
The pound (GBP) is largely subdued this morning amid a data-light start to the week in the UK.
With macroeconomic releases in short supply, renewed anxieties surrounding the UK government’s looming Autumn Budget serve to stymie GBP movement today.
Growing concern that UK Chancellor Rachel Reeve’s budget may introduce a series of sharp tax raises and spending cuts across Britain serve to reinforce worries of a £22bn ‘black hole’ in UK public finances, threatening to further cripple the economy.
As a result, a group of leading UK economists have jointly urged Reeves to reconsider the outlines of the highly impactful 2024 Autumn Budget via public letter today.
An excerpt from the letter, published in the Financial Times this morning, reads:
‘We do not see how the planned “decade of national renewal” can take place if these cuts are delivered.
To follow through on these plans would be to repeat the mistakes of the past, where investment cuts made in the name of fiscal prudence have damaged the foundations of the economy and undermined the UK’s long-term fiscal sustainability.’
With a lack of wider supporting data, investors may avoid placing any aggressive bets on the pound as a revived sense of UK economic pessimism permeates global markets once again.
Euro (EUR) buoyed by USD weakness
The euro (EUR) is posting modest gains against some of its rivals this morning despite a lack of fresh data.
With fresh data in short supply, the single currency finds support in its negative trading relationship with a weakened US dollar (USD) this morning.
Ahead of the Federal Reserve’s looming interest rate decision this week, the ‘greenback’ hobbles close to fresh yearly lows as markets price in a more aggressive policy-easing cycle by the US central bank, in turn lending EUR light support.
Kathleen Brooks, Research Director at XTB, observed:
‘The case for a 50bp rate cut boils down to two things: first, the economic conditions and second, the risk of the Fed falling behind the curve. The economic data is getting weak in the US. The Citi economic surprise index for the US is close to its lowest level since 2015, the labour market is cooling and there are signs of distress in the manufacturing sector, which has been languishing in contraction territory since April.’.
However, the safe-haven single currency’s upside potential was tempered by an improving market sentiment, as investors favour EUR’s riskier rivals so far today.
Pound euro exchange rate forecast: ECB speech in focus
Looking ahead, a data-light session could see EUR investors looking towards the latest commentary by European Central Bank (ECB) Vice President Luis de Guindos. Should markets interpret any dovish signals in Guindos’ present commentary, speculation of further rate cuts this year by the ECB may sour appeal for the common currency.
Looking to the pound, a lack of fresh data in the UK could see Sterling move without a clear trajectory against its rivals. The increasingly risk-sensitive currency could manage to stay afloat amid a prevailing upbeat market mood.