Pound Euro (GBP/EUR) Exchange Rate Quiet amid Lack of Data

May 22, 2023 - Written by John Cameron

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Quiet amid Lack of Data

Pound Euro (GBP/EUR) Exchange Rate Quiet amid Lack of Data

The Pound Euro (GBP/EUR) exchange rate traded quietly on Monday, due to a lack of impactful data releases for both sides of the pairing.

At the time of writing, GBP/EUR traded at around €1.1507, showing little movement from Monday’s opening rates.

Pound (GBP) Quiet amid Lack of Data

The Pound (GBP) saw quiet trade on Monday, as investors shifted focus towards later data releases. On Wednesday, the UK’s latest inflation data is due to print.

With the Bank of England (BoE) waiting on further inflationary signals to consider their next decision, the data release is keeping GBP investors in a nervy mood.

Elsewhere, increased house price sales may be providing some cushioning. Falling house prices are usually indicative of a struggling economy, and with UK house prices on a recent downtrend, the news may be assuaging concerns of a recession.

Furthermore, it indicated that caution created by the disastrous mini budget last year was beginning to subside.

Tim Bannister, Director of Property Science at Rightmove, commented: ‘What is much more likely is that the market will continue to transition to a more normal activity level this year following the exceptional activity of the pandemic years. Steadying mortgage rates and a generally more positive outlook for the economy are also contributing to more seller confidence, though there are likely to be more twists and turns to come.’

However, the Pound may have been limited by a lack of impactful data releases on Monday. Because of this, sentiment towards Sterling may have been impacted, prompting the quiet trade.

Euro (EUR) Struggles amid US Debt Ceiling Jitters

The Euro (EUR) struggled for support at the start of Monday’s European session, as US debt ceiling anxieties continued to impact the single currency.

US President Joe Biden and House Republican Speaker Kevin McCarthy are scheduled to meet on Monday in order to continue negotiating over the debt limits. While both sides have viewed the talks as positive, investors are still considered by the rapidly approaching June 1st deadline.

However, the common currency is likely being underpinned by hawkish comments made over the weekend by European Central Bank (ECB) President Christine Lagarde.

While she stated that most of the work toward taming inflation had been done, she reiterated that the ECB were categorically not considering a pause in rate hikes. As such, markets are still pricing in two more 25bps hikes by September.

However, amidst a quiet data calendar on Monday, investors were likely looking ahead to data releases throughout the week.

Pound Euro (GBP/EUR) Exchange Rate Forecast: Private Sector Flashes to Boost GBP?

Looking ahead for the Pound (GBP), Tuesday sees the release of the latest set of private sector flashes, for both the manufacturing and service sectors.

May’s Service sector activity is forecast by economists to tick down slightly from April’s readings. However, while this could reflect a stutter in the sector, it still remains well into expansion territory and could indicate resilience in the sector.

Furthermore, the manufacturing index is forecast to tick higher. This could boost GBP by pointing to a recovery in the UK’s manufacturing activity over the month.

On Wednesday, the latest consumer price index is due to print. Headline inflation is forecast to cool sharply from 10.1% to 8.3%. If accurate, this fall may be enough to offset the forecast of a hold in core inflation, and weigh on Sterling.

For the Euro (EUR), private sector PMIs may also provide some impetus for the currency. The picture is expected to be similar for the bloc, with a downtick in services and an increase in manufacturing activity.

Because it ultimately indicates a resilient economy, the single currency may strengthen amid the optimism and room for further tightening from the European Central Bank (ECB).

Elsewhere, a series of ECB policymakers are scheduled to speak in the short term. If they provide a consistent, hawkish message the common currency could strengthen.

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TAGS: Pound Euro Forecasts