Pound euro (GBP/EUR) exchange rate subdued as German data beats forecasts
The pound euro (GBP/EUR) exchange rate stumbled at the start of today’s session, as stronger-than-forecast German data boosted the common currency. The pairing has since recouped its initial losses, though it remains muted.
At the time of writing, GBP/EUR is trading at around €1.1912, having briefly touched a four-day low of €1.1895.
Euro (EUR) buoyed by German industrial rebound
The euro (EUR) is enjoying some support this morning following better-than-forecast German factory data.
Industrial production in the Eurozone’s largest economy staged a remarkable recovery in August, with output growing by 2.9%. This followed a 2.9% slump in July and far exceeded the 0.8% rebound analysts had predicted.
The stronger results cheered EUR investors this morning. However, some dovish European Central Bank (ECB) comments have limited the common currency’s upside.
ECB policymaker Mārtiņš Kazāks, who historically has been on the more hawkish end of the spectrum, reiterated today his support for an interest rate cut at the ECB’s meeting this month. This seems to be limiting EUR’s upside potential.
Pound (GBP) muted amid UK budget speculation
Meanwhile, the pound (GBP) is wavering this morning, with the UK currency seemingly having hit a floor following its recent selloff.
Risk aversion, Bank of England (BoE) rate cut bets and anxiety ahead of the ‘painful’ Autumn Budget have seen GBP hit multi-week lows against some peers over the past week.
Today, despite a risk-off market mood and concerns over rising borrowing costs, Sterling is resisting further losses.
One factor keeping the pound from falling further may be expectations that inflation could remain stubborn. Kantar has today reported that grocery inflation ticked higher in September, to 2% from August’s 1.7%.
In addition, economists are speculating that Chancellor Rachel Reeves is planning on changing the government’s fiscal rules to give her more headroom for the budget. This could lead to higher spending and investment, which in turn could be inflationary.
Pound euro exchange rate forecast: risk-off mood to mute GBP/EUR?
Looking ahead, the pound euro exchange rate could remain muted today as a lack of data on both sides leaves the pairing exposed to market risk appetite.
Amid fears of a slower pace of Federal Reserve interest rate cuts and the escalating crisis in the Middle East, a thoroughly downbeat market mood could weigh on the increasingly risk-sensitive pound and support the safer euro.
Meanwhile, domestic UK news could become a pain point for GBP. With the Labour government’s first budget looming and speculation rife, investor anxiety may keep Sterling subdued.