Pound Euro Exchange Rate Undermined By Upbeat Eurozone Data

GBP/EUR Exchange Rate Dented following Eurozone Data Releases

At the time of writing, GBP/EUR traded at around €1.1691, down roughly 0.2% from Tuesday’s opening rate.

The Euro (EUR) managed to strengthen on Tuesday against the majority of its peers following the release of the Eurozone’s latest GDP reading for the first quarter of 2024, and the latest inflationary figures for April.

The preliminary GDP reading for Q1 surpassed market expectations on Tuesday morning, and rose from a previous reading of 0.1% to 0.3%, ahead of a more modest 0.2% expectation.

Sam Miley, Managing Economist at the Centre for Economics and Business Research commented: ‘This morning’s confirmation of quarterly growth in Q1 has put an end to a short-lived recession in the Eurozone, with the economy having turned a corner since the beginning of 2024.’

Further uplifting EUR exchange rates on Tuesday was the latest inflationary reading.

The bloc’s headline inflation rate came in as expected, and remained at 2.4%, however, the latest core inflation reading for April cooled less-than-expected, falling from 2.9% to 2.7% rather than an expected 2.6% reading.

This served to underpin EUR exchange rates on Tuesday on the back of sticker-than-expected inflationary pressures within the Eurozone.

Neil Birrell, Chief Investment Officer at Premier Miton Investors said: ‘Inflation in the Eurozone came in as expected but is proving to be stickier than might have been hoped for, mirroring experiences elsewhere. The economy is moving along nicely though…’

Pound (GBP) Exchange Rates Muted amid Absence of Data

The Pound (GBP) traded in a narrow range against the majority of its counterparts on Tuesday as a lack of any significant UK data releases left the currency trading without a clear trajectory.

As such, GBP investor attention remained on ongoing Bank of England (BoE) interest rate cut speculation, potentially undermining GBP.

Further limiting the pound’s movements was a shift in market risk appetite. As markets engaged in jittery trade, the pound was dented on the back of its position as an increasingly risk-sensitive currency.

Pound to Euro (GBP/EUR) Exchange Rate Forecast: Market Mood to Drive Movement?

Looking ahead, the primary driver of movement for the pound euro exchange rate for the remainder of this week will likely be market appetite for risk.

As both UK and Eurozone data will remain scarce for the majority the week, should cautious trading conditions prevail, the currency pairing could falter further.

However, should markets opts for riskier assets this week, the euro could slump against the pound thanks to its safe-haven status.

The only data release of note this week will come in the form of the Eurozone’s latest unemployment rate for March.

As the data is expected to remain unchanged at 6.5%, any deviation from the expected results could see EUR exchange rates waver.

Current political discourse in the UK may also serve to influence the Pound’s movements this week. As rumours continue to whirl over the timing of the UK’s next general election, any surprise announcements could see the Sterling sentiment infused with significant volatility this week.