Pound-Euro could struggle to extend gains if Eurozone inflation accelerates sharply, although stronger UK GDP may keep Sterling supported.
The Pound to Euro (GBP/EUR) exchange rate trended higher again on Wednesday as GBP investors welcomed the publication of the UK’s latest GDP figures.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1690. Up around 0.2% from the start of Wednesday’s session.
Pound to Euro (GBP/EUR): 1.169771 (+0.27%)
Euro to Dollar (EUR/USD): 1.135989 (+0.17%)
DAILY RECAP:
The Pound (GBP) caught a firm bid on Wednesday morning after revised official figures showed the UK economy fared better than initially thought during the spring.
According to updated national accounts published by the Office for National Statistics (ONS), second-quarter GDP growth was bumped up to 0.5%, improving on the preliminary estimate of 0.4%.
Currency markets took encouragement from the unexpected upgrade. With domestic economic performance holding up more robustly than anticipated, traders reckon the Bank of England (BoE) will have greater scope to pull the trigger on a rate hike when policymakers next meet in November.
The Euro (EUR) was subdued at the start of Wednesday’s session after Germany’s latest retail sales figures fell short of expectations.
While retail sales growth rebounded from –3.2% to 1.3% in August, this missed forecasts that it would climb as high as 1.5%.
The data highlighted how consumer spending is being undermined by elevated energy prices and persistent economic uncertainty.
Subsequent jobs data also sapped EUR sentiment as the number of unemployed persons rose more than forecast in September.
At the same time, EUR sentiment was also undermined by a continued rise in European gas prices.
Near-Term GBP/EUR Forecast: Accelerating Inflation to Boost the Euro?
Looking ahead to the second half of the week, the main catalyst of movement for the Pound Euro exchange rate will be the publication of the Eurozone’s latest consumer price index.
September’s preliminary CPI figures are expected to report a sharp acceleration of inflation across the bloc, with year-on-year price growth expected to climb from 3.2% to 3.6%, it’s highest levels in almost three years.
This in turn may revive bets for another European Central Bank (ECB) rate hike in October and lift the Euro.
On the British side, a lull in notable macroeconomic data means the Pound may struggle to find sufficient domestic fuel to extend its gains much further before the weekend.
Our currency coverage draws on live market data, official economic releases and published bank research.
