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Pound Euro Exchange Rate News: GBP/EUR Stabilises as UK GDP Rebounds in May

GBP/EUR Exchange Rate Steady Following UK GDP Data

The Pound Euro (GBP/EUR) exchange rate is holding its ground this morning as markets welcome the release of the UK’s latest GDP figures.

At the time of writing, the GBP/EUR exchange rate is virtually unchanged from this morning’s opening levels with the pairing trading at around €1.1126.

Pound (GBP) Buoyed by Rebound in GDP

The Pound (GBP) stabilised against the Euro (EUR) this morning, following the publication of the UK’s latest monthly GDP release.

According to data published by the Office for National Statistics (ONS), the UK economy expanded by 0.3% as expected in May, bouncing back from the 0.4% contraction recorded in April.

This rebound was largely attributed to a recovery in UK car production, with production levels beginning to normalise after disruption caused by preparation for the initial Brexit deadline in March.

However the recovery in GDP was unable to spur any notable recovery in the Pound, with the GBP/EUR still languishing close to a six-month low on expectations the UK economy will still suffer a contraction in the second quarter of 2019.

Paul Dales, chief UK economist at Capital Economics explains:

‘Despite the 0.3% m/m rebound in monthly GDP in May, it looks as though the economy contracted by around 0.1% q/q in Q2.

‘That would be the first contraction since Q4 2012, although before today’s release we had expected a 0.2% q/q fall.’

On a more positive note however, Dales suggests the UK will likely manage to avoid a recession this year, as he adds:

‘There’s clearly a risk of a recession (two consecutive quarterly contractions), but we’re not expecting one.’

Euro (EUR) Steady as Italy Industrial Production Beats Expectations

At the same time, the Euro is holding its ground this morning following the publication of Italy’s latest industrial data.

The data revealed that industrial production in the country rebounded stronger than expected in May, jumping from -0.8% to 0.9%, flying past expectations of a more modest 0.1% expansion.

This surge in production came as a major relief to EUR investors, as they suggest that the Eurozone’s third largest economy is a little more resilient than previously thought.

GBP/EUR Exchange Rate Forecast: Will Dovish ECB Minutes Soften the Euro?

Looking ahead, the main catalyst of movement in the Pound Euro (GBP/EUR) exchange rate tomorrow is likely to be release of the minutes from the European Central Bank’s (ECB) June policy meeting.

These minutes may shed some more light on the bank’s policy plans, something which could drag on the Euro if they indicate that ECB policy makers are generally in favour of implementing additional stimulus measures by the end of the year, be this through cutting rates or re-starting its bond purchasing programme.

Meanwhile, the Pound may struggle to take advantage of any weakness in the Euro in the latter half of the week as Sterling sentiment likely remain subdued in the face of heightened political uncertainty in the UK amid rising fears of a no-deal Brexit.