GBP/EUR Exchange Rate to Fall as EUR Investors Focus on ECB?
The Pound Euro (GBP/EUR) exchange rate is lacking support today as the Pound (GBP) suffers from an absence of data and positive Eurozone data boosts the single currency.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1596, which is virtually unchanged from this morning’s opening rate.
Euro (EUR) to Climb following ECB Speeches?
Following yesterday’s better-than-expected German factory orders, the Euro (EUR) is being supported by further positive data from Germany this morning.
Industrial production in Europe’s largest economy only fell by 0.1% in November. This beat the forecast of a 0.6% decline. The smaller-than-expected drop continues to make EUR investors hopeful that Germany and the Eurozone may be heading for a shallower recession.
In addition, the Eurozone’s third GDP growth rate estimate was revised higher, from 0.2% to 0.3% in the third quarter of this year.
Looking ahead, speeches from European Central Bank (ECB) policymakers could guide trade for the rest of the day and into tomorrow. The ECB has been vocal about continuing policy tightening, but at a slower rate.
Fabio Panetta is due to speak this afternoon. If he strikes a hawkish tone about curbing inflation, the Euro could make further gains.
Tomorrow President Christine Lagarde is due to deliver two speeches. Some economists believe that the Eurozone is close to peak inflation. If Lagarde reiterates the banks desire to ease inflation through further hikes this could lift the Euro. The more hawkish her tone, the more support the Euro stands to gain.
Pound (GBP) to Stay Mixed amid Lack of UK Data?
The Pound (GBP) is lacking steady support today. An absence of data is undercutting GBP’s potential as investors focus on domestic headlines.
Reports of struggling businesses and housing market instability are weighing on the UK’s economic outlook. As inflation and the cost of living continue to climb consumers are struggling to make ends meet. This in turn is minimising the potential for a Christmas sales boom, which many businesses need in order to make it to the new year.
However, news of a UK-US gas deal may be lending Sterling some support, as it will hopefully reduce energy bills next year.
Looking ahead, the Pound will likely continue to be driven by domestic headlines. Tomorrow’s lack of data means GBP could struggle for impetus otherwise.
Continued focus on the cost-of-living crisis and how it’s affecting the Christmas season will likely hinder movement. If more businesses report slipping sales, then recession concerns may dent the Pound.
Otherwise, the increasingly risk-sensitive Pound could move in line with market sentiment. Risk appetite has been mixed recently, with the Russia-Ukraine conflict escalating, China unwinding its zero-Covid policy, and uncertainty over the Federal Reserve’s rate hike next week. If the market mood sours, Sterling could slip.