Pound to Euro Exchange Rate News: Aiming for August Best

August 28, 2024 - Written by John Cameron

STORY LINK Pound to Euro Exchange Rate News: Aiming for August Best

The Pound has maintained a firm tone in global markets, supported by solid risk conditions while an on-going lack of confidence in the German outlook has curbed Euro support.

In this environment, the Pound to Euro (GBP/EUR) exchange rate is trading around 1.1825 and close to 3-week highs.

According to ING “EUR/GBP could make a run towards its recent 0.8400 lows.” (1.1905 for GBP/EUR).

The bank is also on the cusp of shifting its long-held bearish Pound view; “And it looks like we'll have to revise our medium-term sterling profile higher.”

Domestically, the British Retail Consortium (BRC) reported that UK shop prices declined 0.4% in the year to August after a 0.2% increase previously and the first annual decline for close to three years.

Prices of non-food goods dropped by 1.5%, the sharpest decline in just over three years, while food prices increased 2.0% from 2.3% and the smallest increase since November 2021.

According to BRC chief executive Helen Dickinson the change was “driven by non-food deflation, with retailers discounting heavily to shift their summer stock, particularly for fashion and household goods”.

Despite better prices data, ING pointed out that Bank of England (BoE) Governor is still wary over inflation trends.

It commented; “Bailey remained concerned over the "intrinsic" inflation in the economy and also felt that the economic costs of tighter policy could be less than what they were in the past.”

These reservations will make the BoE cautious over cutting interest rates further.

As far as the Euro-Zone is concerned, there was a further negative survey from Germany with the gfK consumer confidence index dipping to -22.0 for August from -18.6 previously and below consensus forecasts of -18.

Rolf Buerkl, consumer expert at NIM noted that a world cup boost faded quickly and commented; “In addition, negative news about job security is making consumers more pessimistic and a fast recovery in consumer sentiment seems unlikely."

He added; "Hopes for a stable and sustainable economic recovery must therefore be further postponed.”

Investment banks also continued to react to the IFO data released on Monday.

According to Commerzbank; “The adjustment to the higher interest rate level may take longer than expected and the uncertainty among consumers seems to be lasting longer.”

It added; “Added to this are the numerous structural problems in the German economy, which are slowing down the underlying momentum of the economy. This suggests that the German economy will barely grow in the second half of this year and will at best stagnate for the year as a whole.”

Markets expect an ECB rate cut in September.

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TAGS: Pound Euro Forecasts