Euro Pound (EUR/GBP) Exchange Rate Edges Lower amid Decreasing Economic Sentiment
The Euro Pound (EUR/GBP) exchange rate is trending lower today, amid further falls in EU economic sentiment.
At the time of writing, EUR/GBP is trading at around £0.8642, falling by just under 0.2% from the morning’s opening rates.
Euro (EUR) Fluctuates amid Decreasing Economic Sentiment
The Euro (EUR) is wavering today, following the publication of the latest economic sentiment index for the Eurozone.
In September, economic confidence fell for the sixth consecutive month, dipping down to 93.3 on a monthly basis. While above forecasts, the fall represented a continued decline in consumer sentiment across the bloc.
The European Commission’s report stated:
‘Consumer confidence (-1.6) declined markedly for the second month in a row, as survey respondents became more pessimistic about their household’s past and future financial situation and the expected general economic situation in their country. Consumers also signalled decreased intentions to make major purchases.’
Elevated inflation and the European Central Bank’s (ECB) historically aggressive hiking cycle are continuing to bear down on the economy.
However, weakness in the US Dollar (USD) may be yielding some support for EUR. As this pairing shares a negative correlation, falling USD rates can benefit the common currency.
Pound (GBP) Adrift amid Light Data Calendar
The Pound (GBP) is trading in-line with market dynamics today, due to the continuing short supply of data releases.
With this in mind, Sterling is rising and falling in line with movements in other currencies. For instance, the middling market mood is weighing on the safe-haven US Dollar, bringing some cheer to GBP.
However, any gains are likely being capped by continued reticence amongst GBP investors. Recent data has indicated a continually deteriorating economic outlook for the UK, owing to high inflation and aggressive tightening.
As such, investors have continued to scale back their bets on further rate hikes from the Bank of England (BoE). This is likely preventing Sterling from gaining further ground against its peers.
EUR/GBP Exchange Rate Forecast: German and EU CPI in Focus
Looking ahead for the Euro, this afternoon brings the publication of the latest German inflation data. September’s consumer price index is forecast to cool significantly, with headline inflation expected to cool to 4.6% from 6.1%.
If this reading prints accurately, the common currency may weaken as investors continue to pare back their bets on further tightening.
Then, on Friday, ECB President Christine Lagarde is scheduled to speak. If she strikes a hawkish note, EUR could strengthen.
This is followed by the latest Eurozone inflation data, which is anticipated by economists to follow a similar trajectory. This could further pare back interest rate hike bets, which would weaken EUR.
For the Pound, the final reading of Q2’s UK GDP data is likely to be the core catalyst of movement, if it shows any deviation.
If it prints below the preliminary reading and shows further weakness in the UK economy, Sterling may struggle against its peers.
Elsewhere, market dynamics may shape the pairing. A shift towards bearish trade could lift the safer Euro over Sterling.