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Will GBP/EUR Strengthen on EU GDP Slowdown?

Pound coin on a Euro banknote

Pound Euro (GBP/EUR) Exchange Rate Narrows amid Mixed Market Mood

The Pound Euro (GBP/EUR) exchange rate is trading in narrow boundaries this morning. A cautious market mood is likely keeping the pairing low, as investors await impactful US data this afternoon.

Furthermore, lower-than-expected Eurozone consumer sentiment data could be weighing on the single currency.

At the time of writing, GBP/EUR is trading at around €1.1278, showing little movement from the morning’s opening rates, but edging downward overall.

EUR to Fall amid GDP Slowdown?

Later today, the Euro (EUR) may come experience tailwinds if the latest American GDP data prints as expected. With the two currencies sharing a negative pairing, slowdown in the US economy could weigh on the ‘Greenback’ and lift the single currency.

Tomorrow sees the release of two key data sets, which are likely to shape movement for the common currency. Firstly, the Eurozone’s latest set of GDP data is scheduled to release.

Economic growth in the first quarter is forecast to slow from 1.8% to 1.4%. If this prints as expected, it may weigh on the Euro by pointing to signs that the European Central Bank’s (ECB) current tightening cycle is taking root.

Because of this, rate hike bets may decrease, which could yield a withdrawal of support for the single currency.

However, this may be reversed by the German consumer price index data, scheduled to release early Friday afternoon. Headline inflation is forecast to have cooled from 7.4% to 7.3% in the bloc’s largest economy.

Because of this, investors may expect that the ECB will continue with their current rate hike cycle, as inflation appears to stick far higher than the ECB’s target rate.

Will GBP See Muted Trade amid Lack of Data Releases?

Over the course of today and tomorrow’s session, the Pound (GBP) is subject to a sparse data calendar. Due to the lack of impactful releases, Sterling may trade on market dynamics and its relationships with other currencies.

As an increasingly risk-sensitive currency, the Pound could remain muted in the market mood stays cautious. However, if risk appetite recovers during today and tomorrow’s session, GBP could gain ground against safer assets such as the Euro.

Continued rate hike bets may manage to cushion Sterling from any significant drops, however. With markets continuing to price in a 25bps hike at the Bank of England’s (BoE) May meeting, there is likely to be a trace of support for the currency.

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