The Pound to Euro (GBP/EUR) exchange rate held firm on Tuesday despite cautious comments from Bank of England Governor Andrew Bailey, with easing UK political uncertainty helping to underpin Sterling.
At the time of writing, GBP/EUR was trading at €1.1731, up marginally on the day.
Pound to Euro (GBP/EUR): 1.172927 (+0.02%)
Pound to Dollar (GBP/USD): 1.338681 (+0.28%)
Euro to Dollar (EUR/USD): 1.141317 (+0.26%)
DAILY RECAP:
The Pound (GBP) traded without a clear direction on Tuesday as mixed factors played on the UK currency.
Some downbeat remarks from Bank of England Governor Andrew Bailey may have pressured the Pound, after he said that the ‘big issue’ for the UK economy was a prolonged period of low growth over the past 16 years.
However, Sterling was shored up by rising expectations that the BoE will hike interest rates, as the latest spike in energy prices has reignited inflation fears.
In addition, GBP investors welcomed Monday night’s news that Labour leadership frontrunner Andy Burnham had secured nominations from 349 Labour MPs, making it impossible for any other candidate to run against him.
This contributed to the recent fading of political uncertainty, which lent GBP support.
Meanwhile, the Euro (EUR) faced a little pressure on Tuesday following the publication of Germany’s latest wholesale prices, which showed that prices unexpectedly fell 0.7% in June.
This slightly dampened market consumer price expectations across the Eurozone as a whole, although the recent surge in energy prices has bolstered bets that the European Central Bank (ECB) may raise interest rates again.
These mixed factors left the Euro subdued.
Near-Term GBP/EUR Forecast: Eurozone Production Figures to Support the Euro?
Looking forward, the only data release on Wednesday is the Eurozone’s latest industrial production figures. An expected acceleration in output could support EUR, although the increase is forecast to be marginal, which may limit gains.
As the session unfolds, GBP/EUR could be driven by wider market trends.
The Euro could be impacted by its strong negative correlation with the US Dollar (USD). If USD remains underpinned by market risk aversion, the common currency could face pressure.
Meanwhile, GBP may continue to draw support from easing political uncertainty in the UK, with Andy Burnham expected to become Labour leader on Friday and walk through the doors of Number 10 on Monday.
