Euro Pound Exchange Rate Sluggish amid Tepid Market Mood
The Euro Pound (EUR/GBP) exchange rate is trading narrowly this morning as a lack of Eurozone data keeps investors bearish.
At the time of writing the EUR/GBP exchange rate is trading at around $0.8614, which is roughly the same as this morning’s opening rate.
Euro (EUR) Muted amid Lull in Data
The Euro (EUR) is struggling to find direction this morning amid the absence of any notable EUR data releases.
With several Eurozone countries observing All Saints day this is also limiting liquidity in the single currency.
The Euro also appears to be taking a breather following yesterday’s stronger-than-expected Eurozone inflation release.
Headline inflation rose from 9.9% in September to a record high of 10.7% in October.
While the inflation surge bolstered European Central Bank (ECB) rate hike expectations, it also stoked recession fears within the bloc as yesterday’s GDP report showed a slowing of growth, coming in at 0.2%.
Also weighing on the Euro today is continued escalation of the war between Russia and Ukraine. The conflict shows no signs of abating with recent missile strikes carried out by Russia leading to blackouts and water shortages in Kyiv.
Pound (GBP) Mixed in the Wake of Housing Price Drop
The Pound (GBP) is trading in a broad range this morning as the housing market continues to adjust in the wake of the mini-budget.
Housing prices fell by an average of 7.2% year-on-year in October, more than the forecast 8.3%. Despite a fall in house prices, climbing mortgage rates are putting pressure on UK consumers currently dealing with the cost-of-living crisis and a looming winter recession.
Mark Beck, Chief Economic Advisor to the EY ITEM Club said that the fall in house prices was a sign of things to come:
‘Cost of living pressures remain challenging, and face being exacerbated by tax rises and public spending restraint in November’s Autumn Statement, and consumer confidence is notably depressed.’
However, the Pound’s losses could be being curbed by an undercurrent of rate hike bets taking place ahead of the Bank of England’s (BoE) next interest rate decision. Markets are currently pricing in a 75bps hike at Thursday’s policy meeting.
Euro Pound Exchange Rate Forecast: Euro to Fall as Ukraine War Escalates?
The Euro Pound exchange rate could be driven by geopolitical developments within Ukraine today.
A lack of data for the rest of the day may see Euro investors focus on the escalation of fighting between Ukraine and Russia. If Russia launches further missile attacks targeting Kyiv’s infrastructure, then the Euro could face headwinds.
Elsewhere, EUR investors might turn their attention to the raft of German data set to release tomorrow, including October’s manufacturing PMI, jobs data and the balance of trade. All of which is predicted to print positively and could shore up the single currency.
Turning to the UK, investors will likely continue to focus on the BoE’s interest rate decision on Thursday. If the central bank raises interest rates by the expected 75bps, then GBP could enjoy some tailwinds. However, a smaller hike could weigh on the Pound.
