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Pound Euro (GBP/EUR) Exchange Rate Gains Despite UK Manufacturing Downturn

Pound coin on a Euro banknote

Pound Euro (GBP/EUR) Exchange Rate Bolstered by Risk-On Mood

The Pound Euro (GBP/EUR) exchange rate is climbing today. A risk-on market mood is helping to boost the currency pair as well as signs of easing inflationary pressures in the Eurozone.

At time of writing the GBP/EUR exchange rate is at around €1.1646, which is up roughly 0.5% from this morning’s opening figures.

Pound (GBP) Climbs Despite Downbeat Data Releases

The Pound is rising today amid a return of global risk appetite. Sterling may also be benefitting from a dovish pivot from Federal Reserve Chair Jerome Powell.

The currency’s gains are likely to remain limited amid downbeat data releases for the UK economy, however. The final reading of November’s manufacturing PMI confirmed a contraction in the sector as factories continued to struggle amid soaring prices.

A sharp decline in housing prices may also weigh on the Pound today. House prices in November fell by 1.4% month-on-month, the sectors largest monthly drop since June 2020.

Signs that the UK’s cost-of-living crisis is only set to get worse may also be keeping Sterling subdued today. UK food price inflation rose to a fresh high of 12.4% in November.

Euro (EUR) Climbs as Unemployment Hits New Record-Low, Falls Against GBP after Retail Slump

The Euro (EUR) is climbing against many of its rivals today. The single currency is struggling against the Pound however amid a risk-on impulse in the markets.

Eurozone unemployment figures could be helping to push EUR higher today. Unemployment fell to a fresh record low of 6.5% in October pointing to a tight labour market in the trading bloc. The data is likely prompting increased bets on further interest rate hikes from the European Central Bank (ECB) today.

Dovish comments from ECB policymakers could be undermining these rate hike bets, however. Speaking in an interview published today, ECB board member Yanis Stournaras signalled that any additional rate hikes ‘must be gradual’.

A drastic downturn in German retail sales could be weighing on EUR today. October’s sales fell by 2.8% as inflation pushed prices of non-essential goods to unobtainable highs. The data also added to fears on an imminent recession in the trading bloc’s largest member.

A below-forecast printing of the latest Eurozone manufacturing PMI may also be pushing the Euro lower today. Whilst the figures indicated an easing of inflationary pressures in November, the sector still contracted.

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