Euro Pound (EUR/GBP) Exchange Rate Rangebound amid Thin Trading Conditions
The Euro Pound (EUR/GBP) exchange rate is narrow this morning, as thin trade conditions keep markets quiet.
At the time of writing, EUR/GBP is trading at around £08845, showing little movement from this morning’s opening rates.
Euro (EUR) Mixed amid Thin Trading Conditions
The Euro (EUR) is seeing mixed trade this morning, as a lack of impactful economic data is keeping focus off the single currency.
However, the market mood and recent comments from European Central Bank (ECB) policymakers could be cushioning EUR.
Yesterday, ECB policymaker Robert Holzmann reaffirmed his hawkish stance, stating that:
‘Policy interest rates will have to rise significantly further to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target.’
He joins a series of ECB policymakers who are continuing to reiterate the bank’s stance on inflation. With the Eurozone economy appearing to be in decent standing, it could be possible for the bloc to avoid a recession. As such, investors believe there is further capacity for further rate hikes as the ECB seeks to curtail inflation.
Elsewhere, developments in the Ukraine-Russia conflict may be serving to keep EUR quiet. Ukrainian President Volodymyr Zelenskiy has warned Ukrainian troops to be ready in areas near Belarus, anticipating a fresh Russian attack.
Pound (GBP) Supported by Christmas Sales Boost
The Pound (GBP) is ticking upwards this morning, as a spate of UK retailers announce their festive profits.
Retailers such as Tesco and Marks & Spencer have posted profits for the festive period which exceeded their expectations. They joined Sainsburys, who announced yesterday that their profits were reaching the higher end of expectations.
Overall, sales in the UK over the Christmas period in 2022 were 7.8% higher than they were in 2021. With the UK’s retail sector appearing to be in good shape, investors could be bringing support to Sterling.
However, the outlook is looking less cheery. Retailers suggested that 2023 may be less upbeat. Marks & Spencer warned that there are ‘clear macroeconomic headwinds and underlying cost pressures’ ahead for UK consumers.
Elsewhere, a risk-averse market mood could be capping Sterling’s gains this morning, due to GBP’s increasingly risk-sensitive nature.
Euro Pound (EUR/GBP) Exchange Rate Forecast:
Looking ahead for the Euro, tomorrow sees the release of Germany’s 2022 GDP growth data. A fall is forecast from 2.6% to 1.8%, which could dent EUR by pointing to a slowdown in the German economy. As the Eurozone’s largest, this slowdown may be seen to be representative of a wider trend across the bloc, which could spark recession anxieties.
However, tomorrow’s industrial production data for the Eurozone is expected to show a jump from -2% to 1.8%. As such, the mixed picture could serve to narrow EUR exchange rates.
For the Pound (GBP), tomorrow brings the UK’s GDP data for November. The UK’s GDP is expected to have contracted from 0.5% to -0.2%, which will likely weaken Sterling if it prints as forecast.
As the UK’s economy continues to show signs of struggling, further news of industrial action may add extra pressure. However, if an agreement is reached between union leaders and ministers, GBP could rise on the relief.