Euro Pound (EUR/GBP) Exchange Rate Trends Sideways as ECB Hawks Advocate for Further Hikes
The Euro Pound (EUR/GBP) exchange rate is trading in a narrow range today. Hawkish comments from European Central Bank (ECB) officials may be lending support to the exchange rate.
On the other hand, better-than-forecast UK government borrowing figures may be limiting any gains for EUR/GBP.
At time of writing the EUR/GBP exchange rate is at around £0.8846, virtually unchanged from this morning’s opening figures.
Euro (EUR) Subdued despite Hawkish ECB Rhetoric
The Euro (EUR) is seeing muted movements today amid a lack of significant data. A pullback in global risk appetite may be limiting drastic losses for EUR.
Hawkish comments from ECB policymakers may also be preventing a sharper downturn in the Euro today.
Speaking to French newspaper Le Monde on Tuesday, ECB chief economist Philip Lane said:
‘For our next Governing Council meeting on 4 May, the current data are indicating that we should raise rates again. Beyond that, I don’t have a crystal ball; it will depend on the economic data’
A poll released by Reuters on Tuesday may be adding to these bets today. 57 of the 69 economist surveyed expect the ECB to raise interest rates by 25bps at its next meeting.
Pound (GBP) Edges Lower, Subdued against EUR as UK Government Borrows Less than Forecast
A cautious market mood may be weighing on the Pound (GBP) today. Concerns regarding the health of the global economy may denting confidence in the markets.
Downbeat data for the UK’s manufacturing sector may also be pulling GBP lower today. The Confederation of British Industry’s (CBI) industrial trends orders fell -20 April.
UK government borrowing figures for the end of the most recent financial year may be cushioning any losses for GBP today, though. The UK government borrowed less than forecast the 12 months to March.
The figures added to a more optimistic outlook for the UK’s economy, and inspired speculation that UK Chancellor Jeremy Hunt may be able to adopt a less strict financial stance over the coming year.
EUR/GBP Exchange Rate Forecast: Will Rate Hike Signals from ECB Rate-Setters Bolster EUR?
A range of speeches from ECB officials this week could bolster the Euro if policymakers signal any further rate hikes from the central bank.
EUR could find further support on Wednesday if German consumer confidence improves as forecast. May’s reading is expected to rise to a fresh high point, with April’s reading the highest since July 2022.
On Thursday, Eurozone economic sentiment is similarly forecast to improve in April. This could add to any gains for the single currency.
Friday is set to bring a range of high-impact data for EUR. On the one hand, Germany’s economy is set to have expanded by 0.2% in the first quarter of 2023 after a 0.4% contraction at the end of 2022. This could add to hopes that the trading bloc’s largest member will avoid a recession this year, and lift EUR.
On the other hand, the Eurozone’s economic growth is set to cool from a 1.8% expansion to 1.4% in the first quarter of 2023. The data could dampen any gains for EUR.
Also on Friday, expected cooler German inflation figures could add to any downturn for the single currency. April’s inflation is set to print at 7.3%, down from 7.4% in the previous month.
The Pound could come under additional pressure on Wednesday if the CBI’s distributive trades figures slip as expected. Sales activity in the UK is forecast to have stagnated in April.
