Euro Pound Exchange Rate Softens as UK Economy Unexpectedly Grows
The Euro Pound (EUR/GBP) exchange rate is weakening after the UK recorded a surprise economic growth, avoiding a stagnation.
At time of writing the EUR/GBP exchange rate is trading around £0.8638, a 0.33% from this morning’s opening levels.
Pound (GBP) Supported by Surprise Growth
The Pound (GBP) is finding modest support this morning as the UK economy avoided a stagnation in the second quarter of 2023.
The Office for National Statistics (ONS) reported that against predictions of zero growth, the UK economy actually expanded 0.2% in Q2 this year. Further boosting morale was the upbeat monthly expansion too. An expected modest 0.2% increase in June was bettered as it registered a 0.5% increase. After a disappointing May, a welcome return to growth could allay fears of a recession.
Darren Morgan, Director of Economic Statistics, said:
‘The economy bounced back from the effects of May’s extra bank holiday to record strong growth in June. Manufacturing saw a particularly strong month, with both cars and the often-erratic pharmaceutical industry seeing particularly buoyant growth.
‘Services also had a strong month, with publishing and car sales and legal services all doing well, though this was partially offset by falls in health, which was hit by further strike action. Construction also grew strongly, as did pubs and restaurants, with both aided by the hot weather.’
However, preventing any further gains is the concern over soaring borrowing costs yet to weigh on the economy. With recession fears still lingering, Ruth Gregory, Economist at Capital Economics, said of the situation:
‘With much of the drag from higher interest rates still to come, we are sticking to our below-consensus forecast that the UK is heading for a mild recession later this year.’
Euro (EUR) Quiet ahead of Crucial US Data
Meanwhile, the Euro (EUR) is continuing to struggle for a clear direction amid a lack of economic data. The negative correlation the Euro shares with the US Dollar (USD) is playing a major role in the former’s movement on the latter’s weakness.
With the market turning cautious ahead of another crucial US inflation data release today, the single currency remains quiet. After the shock softer-than-expected US inflation data, the ‘Greenback’ subsequently plunged, and the Euro found strength.
Ahead of the latest PPI inflation data, the Euro remains quiet as investors move to the sidelines for the mid-tier inflation release.
Euro Pound Forecast: US PPI Inflation to Boost the Euro?
Looking ahead, the Euro Pound exchange rate could see some movement with the latest PPI inflation data in the US. If the figures miss the mark, or at least point to further easing of US inflationary pressures, the Euro could climb.
Meanwhile, the Pound could see further gains as the market continues to digest the upbeat GDP data. Receding recession fears could see Sterling bolster heading into the weekend.
