Euro Pound Exchange Rate Rangebound in Spite of ECB Address
The Euro Pound (EUR/GBP) exchange rate is trading narrowly this morning as a hawkish speech from European Central Bank (ECB) President Christine Lagarde fails to cheer investors.
At the time of writing the EUR/GBP exchange rate is trading at around €0.8712, which is virtually unchanged from this morning’s opening rate.
Euro (EUR) Under Pressure Despite Hawkish Rhetoric
The Euro (EUR) is down against the majority of its peers this morning in spite of ECB President Lagarde reassuring investors the bank expects to continue to raise interest rates.
In her speech Lagarde acknowledged that inflation in the Eurozone had gotten far too high. Lagarde attempted to ease concerns by stating:
‘[I]t is monetary policy that will determine whether these shocks lead to lasting inflation. And we will not allow that to happen. We will therefore have to raise rates to levels that will deliver our 2% medium-term inflation target.’
However, the Euro’s potential upside was hindered by mixed data. Germany, the bloc’s largest economy, reported a worse-than-expected decline in factory orders. Order growth dropped by a staggering 4% in September, far surpassing expectations for a 0.5% contraction.
Turning to the final composite PMI for October, the figures beat forecasts. They fell from 48.1 to 47.3, missing predictions of 47.1. However, despite the reduced drop the data still marked the third consecutive contraction in the Eurozone’s private sector.
Pound (GBP) Struggles to Recover Without Data
The Pound (GBP) is mixed this morning as a lack of notable data has left UK investors to digest the country’s worsening economic outlook.
The Pound plummeted yesterday after to the Bank of England (BoE) announced the UK was in a recession. The preceding 75bps hike did little to temper investor woes amid the prediction the recession could last for two years.
Ahead of his speech this afternoon BoE policymaker Huw Pill said a slight economic slowdown was needed to tackle rising inflation before adding:
‘What we are seeking to do, we’re always seeking to do, is to find that balance that gets us back to our 2% inflation target without generating unnecessary and costly problems in the real side of the economy.’
With energy and food prices continuing to rise because of inflation this is little comfort for GBP investors. The stark reality of the deepening cost-of-living crisis facing UK consumers is hindering the Pound’s recovery today.
Euro Pound Exchange Rate Forecast: Pound to Slip on Economic Woes?
The Euro Pound exchange rate could continue to be driven by the UK’s economic concerns early next week.
A sparce data calendar will have investors focusing on domestic headlines. Any news reaffirming the UK’s bleak economic outlook could dent Sterling.
Turning to the Euro, retail sales are expected early next week. September’s data is expected to print positively, increasing from -0.3% to 0.3%. If true, the Euro could see an uptick, but if the data misses the mark the single currency could be dented.
