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Euro Pound (EUR/GBP) Exchange Rate Edges Higher amid Downbeat Trade

EUR GBP Exchange Rate

Euro Pound (EUR/GBP) Exchange Rate Firms amid Risk-Off Market Mood

The Euro Pound (EUR/GBP) exchange rate is strengthening this morning, owing to a downbeat market mood.

At the time of writing, EUR/GBP is trading at around £0.8558, rising by just over 0.2% from the morning’s opening rates.

Euro (EUR) Strengthens amid Risk Averse Trade

The Euro (EUR) is off to a strong start this week, owing to a downbeat market mood. As a safer currency, EUR is able to enjoy safe-haven flows amid declining levels of risk appetite.

The dour mood is being brought about by continuing concerns over the Chinese economy. The People’s Bank of China (PBoC) did announce a rate cut, but pursued one below market expectations. Due to continued headwinds, the bank may have limited room to manoeuvre in terms of cutting rates.

However, the Eurozone’s own economic outlook isn’t particularly rosy, which may be placing a ceiling on the single currency’s gains. As such, the focus is shifting to the week’s private sector index flashes.

Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, explains:

‘Currently, gloom is descending on the European outlook, including the re-introduction of Germany’s description as the ‘sick man of Europe’. Let’s see whether the manufacturing PMIs deteriorate any further and also whether services PMIs cross decidedly into sub-50 territory.’

Pound (GBP) Listless amid Light Data Calendar

The Pound (GBP) is grappling with listless trade this morning, as investors to continue to mull the UK’s economic outlook.

The lack of drive comes amid a light data calendar, preventing Sterling from finding a clear catalyst of movement.

Last Friday, the latest UK retail sales data showed a sharper-than-forecast plunge in consumer spending. This is indicating to economists that the cost-of-living crisis and elevated interest rates may be weighing heavily on UK households.

Because of this, the question of further tightening from the Bank of England (BoE) is growing more muddled. While core inflation does remain sticky in the UK, further tightening could push the UK economy into a recession.

Elsewhere, the UK housing market continues to show signs of struggle. Prices were found to have fallen by 1.9% in August on a monthly basis.

EUR/GBP Exchange Rate Forecast: EU PMIs in Focus

Looking ahead for the Euro, Wednesday brings the publication of the latest Eurozone private sector indexes. In July, activity is forecast to have wavered, with the manufacturing index expected to tick higher, while the services reading is forecast to have fallen.

If this prints accurately, it may weigh on the single currency by pointing to continued economic weakness across the bloc.

Beforehand, the German manufacturing index is set for publication. Activity in the key sector is forecast to have weakened further in August, which may damage the Euro.

For the Pound, the latest PMI flashes are also due on Wednesday. Here, the picture is forecast to be bleaker with both manufacturing and services sectors forecast to have slowed in August.

If this data prints accurately, the Pound is likely to weaken as the UK economy continues to balance on a knife-edge.