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Euro Pound Sterling (EUR GBP) Stumbles as UK GDP Grows as Forecast

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Whilst the Euro Pound Sterling exchange rate remains at highs not seen since 2008, concerns grow that European Central Bank (ECB) President Mario Draghi will disappoint tomorrow at the Jackson Hole Symposium, leaving demand for the Euro faltering.

Beyond this, today’s UK GDP figures have proved effective in bolstering the Pound, as they demonstrated 0.3% growth in the second quarter – equating to annual growth of 1.7%.

Both figures are consistent with previous estimates, though the quarter-on-quarter figure printed higher than the 0.2% expansion demonstrated in Q1.

The primary contributor to said growth was strong expansion in government investment and spending, whilst household consumption demonstrated a much softer pace of growth and business investment as a whole stalled to 0% in the wake of continued Brexit uncertainty.

Some economists are less than impressed, claiming that concerns remain that the UK economy is moving towards a ‘cliff-edge’.

Jasper Lawler, at London Capital Group supported this sentiment, stating:

‘Sluggish growth adds credence to the notion of the UK economy nearing a Brexit-induced cliff-edge. Recent signs of falling business confidence become of particular concern when they translate into the ‘hard data’. Nonetheless, while UK growth trudges along at a slow pace, the Bank of England will view it as offset by above-target inflation. The decision whether to raise rates is still finely balanced and we expect the Bank of England to continue to do what they know best, nothing’.

In other data, the number of loan approvals for house purchases in the UK jumped to 41.587 in July, up from the previous month’s revised figure of 40.385 and beating the expected figure of 40.9k.

Jackson Hole and Draghi, what can we Expect for the Euro (EUR)?

Tomorrow a large number of economists and officials will gather in Jackson Hole for this year’s symposium – a key event to watch.

Federal Reserve Chair Janet Yellen is due to speak at 1500BST and ECB President Mario Draghi is due to speak at 2000BST.

The fall of this pairing today can also be attributed, in some part, to investors expecting Draghi’s speech to be unlikely to offer anything of significance, especially with his recent speech defending the use of quantitative easing (QE).

Ultimately markets don’t like being caught unaware, and with the overall sentiment for the ECB remaining dovish, demand for the Euro is dipping in anticipation.

EUR GBP Forecast: German GDP, Exports, and IFO Sentiment Readings on the Horizon

The UK’s GDP figures gave the Pound some breathing room, but whether this will persevere into the end of this trading week is uncertain.

As previously mentioned, the most significant mover will likely be tomorrow’s Jackson Hole symposium, though tomorrow will also feature German GDP readings, export data and IFO sentiment figures.

German GDP is currently forecast to drop from 0.7% to 0.6% quarter-on-quarter, with the annual figure forecast to increase from the previous period’s 2% to 2.1%.

Month-on-month import prices in July are expected to increase from -1.1% to 0.2, however, though the year-on-year figure is forecast to drop from 2.5% to 2.3%.

The forecast for German data, then, is mixed, which could help the Pound move away from its worst rates.