Euro Pound (EUR/GBP) Exchange Rate Slips amid Risk-On Mood
The Euro Pound (EUR/GBP) exchange rate is falling today. The pairing may be coming under pressure from expectations of lower Eurozone inflation, as well as Bank of England (BoE) rate hike bets. A positive risk tone could also be deepening losses for EUR/GBP.
At time of writing the EUR/GBP exchange rate is at around €0.8740, which is down roughly 0.5% from this morning’s opening figures.
Euro (EUR) Bolstered by German Trade Data, Slips against Pound
The Euro (EUR) is firming against many of its peers today. EUR may be finding support from upbeat German trade data and European Central Bank (ECB) rate hike bets.
On the other hand, a return of risk appetite could be prompting EUR’s losses against the Pound.
Whilst Germany’s trade surplus remained unchanged in February, the country saw a sharp rise in exports. February’s export levels rose by 4% versus the forecast easing to 1.6%.
The data may be adding to recent optimistic signs for the German economy. The country’s Joint Economic Forecasts on Wednesday are expected to confirm that the trading bloc’s largest member will dodge a 2023 recession.
The newest PPI figures for the Eurozone may also be keeping EUR buoyed today. February’s PPI fell by 0.5%, more than the forecast decline of 0.3%. However, the figures were a marked increase from January’s drop of 2.8%. This may be influencing the positive movement in the Euro today.
On the other hand, the results of the latest ECB consumer inflation expectations may be dampening enthusiasm for EUR today. The ECB stated that inflation expectations have fallen to 4.6% from 4.9% over the next 12 months.
Pound (GBP) Soars amid BoE Rate Hike Bets
The Pound (GBP) is making strong gains today with no significant data to bolster it. Sterling’s gains could be down to persistent BoE rate hike bets.
Markets are continuing to price in a 25bps rate hike at the central bank’s next meeting, as well as additional tightening over the summer.
These rate hike bets may be capped by recent dovish comments from BoE policymaker Silvana Tenreyro, however.
Speaking today, Tenreyro said:
‘I expect that the high current level of Bank Rate will require an earlier and faster reversal, to avoid a significant inflation undershoot.’
EUR/GBP Exchange Rate Forecast: Will Hawkish Signals from ECB’s Lane Boost Euro?
The Euro could see a boost on Wednesday if the final reading of March’s Eurozone services PMI prints as forecast. The figures are set to confirm an expansion in the sector.
Also on Wednesday, a speech from ECB rate setter Philip Lane could inspire more movement in EUR. Markets will be looking for any hints of the central bank’s rate hike path. Hawkish signals could push the single currency higher.
EUR could come under pressure this week if market mood remains upbeat. A risk-on mood is likely to weigh on the Euro.
A speech from BoE chief economist Huw Pill could dampen enthusiasm for the Pound later today. Experts are forecasting that Pill is likely to highlight the slack in the UK’s labour market, which may weaken BoE rate hike bets.
The latest financial policy summary for the central bank could have a similar effect of Sterling today if it contains any forward guidance. On Wednesday, the final reading of March’s PMI for the UK’s dominant services sector could have a muted effect on GBP. The PMI is set to have ticked lower last month, but will remain in positive territory.
