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GBP/EUR Exchange Rate Recovery to Stall amid Recession Fears?

Pound and Euro coins on a five-Pound note.

GBP/EUR Exchange Rate Rises as Investors Hunt for a Bargain

The Pound Euro (GBP/EUR) exchange rate strengthened this morning as GBP investors course correct and reinvest in oversold Sterling.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1479, which is up roughly 0.5% from this morning’s opening rate.

Can the Pound (GBP) Sustain Its Fragile Recovery?

The Pound (GBP) is strengthening today as investors buy the dip, preparing for a fresh week of trade.

From Thursday onwards last week the Pound crashed as the UK’s economic outlook darkened. The Bank of England (BoE) forecast a two-year long recession, which it believes has already begun.

However, fresh demand for the Pound saw it recover some ground today as investors corrected their eager sell-off last week.

For the rest of the day, in the absence of significant data, Sterling could see its recovery run out of steam.

Tomorrow, GBP could see some movement in response to BoE policymaker Huw Pill’s speech. Investors could focus on him for guidance on the BoE’s future plans. If Huw’s speech is hawkish this could extend the Pound’s recovery. However, if he sounds more dovish – which is perhaps more likely – GBP could shed some of its gains.

Euro (EUR) to Be Weighed Down by Ukraine Developments?

The Euro (EUR) is trading in a broad range this morning, despite Germany’s positive data release.

The Eurozone’s largest economy, Germany, released its industrial production figures for September. Figures were forecast to rise from -1.2% to 0.2%, but instead climbed to 0.6% giving EUR an unexpected boost, perhaps limiting its losses against the Pound.

It’s possible that further developments from within Ukraine could be pressuring the single currency today as the country braces for a fresh wave of attacks and blackouts.

Addressing the country last night, President of Ukraine Volodymyr Zelenskiy said:

‘We also understand that the terrorist state is concentrating forces and means for a possible repetition of mass attacks on our infrastructure.’

Turning to tomorrow, speeches and fresh data could create new impetus for the Euro. Andrea Enria of the European Central Bank (ECB) is due to give two speeches. If his tone is hawkish then this could support EUR, while more dovish rhetoric could limit the single currency’s upside.

Retail sales will likely also impact movement tomorrow. Eurozone sales are expected to have grown by 0.3% in September following a 0.3% contraction the previous month. If true, then the Euro could find fresh support on Tuesday. If the data misses forecast though, the single currency could face headwinds.

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