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Euro Pound Exchange Rate Weakens as UK Q4 GDP Revised Higher

Euro Pound exchange rate forecast

The Euro Pound exchange rate (EUR/GBP) dipped in this morning’s session after the Pound was supported by a revised growth in GDP for Q4.

At the time of writing the EUR/GBP pairing is currently trading at around 0.8522.

Euro (EUR) Exchange Rate Muted as Eurozone Inflation Rises

The Euro was muted this morning after a flash inflation reading from the Eurozone showed a rise in inflation during March.

Eurozone headline inflation increased from 0.9 to 1.3% in March, mainly on the back of energy price inflation.

Analysts from ING commented on the rise in inflation, but played down any indication that it would rise too much:

‘With wages weak, fiscal stimulus set to fade and growth expectations slower than in the US, overheating in the Eurozone is really not an issue for the moment. Most factors pushing up inflation are temporary or statistical in nature: energy inflation, the German VAT increase and the changes in weights in the inflation basket are important ones to name a few key ones.’

The Euro has been supported during this morning’s session, however, due to its negative correlation with the US Dollar.

The US Dollar has seen itself struggling this morning ahead of President Joe Biden’s speech on infrastructure spending as investors wait cautiously, while also weakening in some end of month profit taking.

Pound (GBP) Exchange Rate Bolstered by UK GDP Data for Q4

The Pound is being supported during today’s session as the final Q4 GDP reading from the UK was revised higher and confirmed the country avoided a double-dip recession.

Updated data from the Office for National Statistics (ONS) show that UK GDP rose by 1.3% in October-December, a sharper recovery than the 1% first estimated for the final quarter of 2020.

Rupert Thompson, chief investment officer at wealth management firm Kingswood, commented on the revised growth:

‘This follows the recent stronger than expected numbers for business confidence which suggests the contraction in the first quarter will be smaller than first feared. Meanwhile, the fast vaccine rollout has bolstered hopes of a rapid rebound over coming months.’

As England awaits the next stage of lockdown easing on the 12th of April, investors are becoming increasingly optimistic surrounding the UK’s economic recovery from the coronavirus pandemic.

It comes as shielding for millions of people in England and Wales tomorrow. Dr Jenny Harries, deputy chief medical officer for England, spoke on the end of shielding earlier in the month:

‘With the prevalence of the virus in the community continuing to decrease, now is the right time for people to start thinking about easing up on these more rigid guidelines.’

‘If you have been shielding, we strongly urge you to take extra precautions following April 1 to keep yourself as safe as possible, such as continuing to observe social distancing and working from home.’

Euro Pound Exchange Rate Outlook: Markit Manufacturing PMI’s in Focus

For Euro traders, tomorrow will see the release of the latest manufacturing PMI from the Eurozone which is forecast to have increased at a record pace to 62.4 points, a growth in the sector which would help to push the Euro higher.

Euro traders will also be looking towards German retail sales data released tomorrow which are forecast to have returned a positive reading with growth of 2.4% during February, before renewed coronavirus restrictions plagued the country again.

For Pound investors, the release of the UK’s manufacturing PMI is also expected to rise to its highest levels since the end of 2017 during March as Brexit delays and coronavirus restrictions began to ease.