Euro Pound (EUR/GBP) Exchange Rate Firms as UK GDP Disappoints
The Euro Pound (EUR/GBP) exchange rate edged higher during today’s trade, amid underwhelming UK GDP data. Additionally, analysis of the UK’s economy proved downbeat, weighing on Sterling.
At the time of writing, EUR/GBP is trading at around £0.8641, a rise of just under 0.2% from the morning’s opening rates.
Pound (GBP) Undermined by Downbeat GDP Analysis
The Pound (GBP) traded in a mixed capacity over Thursday, following the release of tepid UK GDP data.
August’s reading printed in line with market expectations, reflecting a 0.2% expansion in the economy. However, it was pared with a downward revision to July’s GDP print, which was lowered to -0.6%.
Because of this, it did little to assuage recession anxieties amongst investors, and further analysis painted a sombre picture.
Melanie Baker, Senior Economist at Royal London Asset Management, commented:
‘For now, the picture of the economy coming from the data is lacklustre. Given how much monetary policy tightening we’ve had it is still somewhat surprising that the UK economy has managed to avoid recession so far. I am not convinced it will continue to do so.’
As such, investors began to pare back their bets on further interest rate hikes from the Bank of England (BoE), as the UK’s economic outlook remained bleak.
Euro (EUR) Capped by Dovish ECB Split
The Euro (EUR) saw muted trade on Thursday, following the release of the latest European Central Bank Monetary Policy meeting minutes.
The minutes showed an increasing divide between ECB policymakers, with the dovish voice becoming more prevalent.
This came on the back of a dovish speech from ECB Policymaker Villeroy de Galhau, who advocated patience rather than further ‘activism’.
Furthermore, ECB policymaker Pierre Wunsch stated:
‘Maybe we’ve reached the peak in interest rates. If inflation meets forecast, then no more rate hikes are needed. We have to live with current uncertainty. Oil prices are an upside risk to inflation.’
Elsewhere, strength in the US Dollar (USD) contributed an additional tailwind for EUR, due to the pairing’s negative correlation.
Euro Pound Exchange Rate Forecast: ECB Speech in Focus
Looking ahead for the Euro, the core catalyst of movement is likely to come from a speech from ECB President Christine Lagarde tomorrow.
If President Lagarde takes a hawkish stance, EUR rates could strengthen amid renewed rate hike bets. However, if she maintains a dovish narrative, the common currency could weaken.
Beforehand, the latest Eurozone industrial production data is due to print. Economics forecast a 0.1% increase in production, which may do little to benefit EUR rates as it could indicate stability at a low level.
For the Pound, meanwhile, data releases are set to dry up through to the end of the week. As such, GBP may be unable to find clear direction during Friday’s session.
Elsewhere, risk appetite is likely to play a role in driving the pairing. As a safer currency, a souring market mood could strengthen EUR/GBP.