Pound to Euro Exchange Rate Today: GBP Lower as UK GDP Misses Forecasts

September 13, 2024 - Written by John Cameron

STORY LINK Pound to Euro Exchange Rate Today: GBP Lower as UK GDP Misses Forecasts

The Pound Euro (GBP/EUR) exchange rate edged lower on Wednesday following the UK’s latest GDP release.

At the time of writing GBP/EUR was trading at €1.1847, down approximately 0.2% from Wednesday’s opening rate.

The Pound (GBP) faced a downturn following the release of the UK's GDP figures on Wednesday.

Contrary to the anticipated growth of 0.2%, the economy showed no growth in July, deviating from the previous month's 0.2% expansion.

Additionally, July's industrial output in Britain saw a decline of 0.8%, contrary to the expected increase of 0.3%. Manufacturing output also declined by 1%, falling short of the forecasted 0.2% rise.

However, despite signs of a weakened economic landscape in the UK, analysts believe that these figures will not heavily influence the Bank of England's current trajectory towards policy easing.

Luke Bartholomew, Deputy Chief Economist at abrdn, noted:

‘The broader trend remains solid, although it is likely that the underlying pace of growth will slow somewhat over the second half of the year.
Certainly, there is no reason yet for the Bank and England to feel it needs to speed up the pace of rate cuts, and we expect the Bank to keep interest rates on hold next week.’

As a result, the Pound's depreciation was minimal, with only slight losses noted against major currencies on Wednesday.

The Euro (EUR) displayed limited fluctuations against the majority of its significant trading partners on Wednesday, as market participants held back from making substantial moves ahead of the European Central Bank's (ECB) highly anticipated interest rate decision.

The ECB is set to announce its decision on Thursday afternoon, with market consensus leaning heavily towards a 25 basis-point reduction in interest rates. This expectation has been largely priced into the market, reflecting a cautious optimism among investors.

Michael Field, Strategist at Morningstar, commented:

‘With 85% of economists polled expecting a 25 basis point rate cut by the ECB, it's safe to say the markets will be disappointed if this doesn’t happen. When expectations are so unified though, generally it’s for a reason. In fact, two reasons that we can clearly identify.’

Amid a series of lacklustre economic reports from the Eurozone, the anticipated confirmation of a rate cut by the ECB could potentially lead to a weakening of the Euro against its global counterparts. Investors are closely monitoring the situation, gauging the potential impacts on the currency's performance in the near term.

Looking forward, markets are keenly awaiting to see if the ECB opts for a rate cut, which could lead to a depreciation of the Euro. Conversely, should the ECB surprise markets by holding rates steady, the euro might find unexpected strength against its counterparts.

Looking to the Pound, a lack of substantial economic releases in the UK could leave GBP somewhat adrift, potentially causing Sterling to trade erratically or without clear direction.

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TAGS: Pound Euro Forecasts