Pound Euro Exchange Rate Flat despite Rising ECB Rate Cut Speculation

October 13, 2024 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Flat despite Rising ECB Rate Cut Speculation

The Pound Euro (GBP/EUR) exchange rate treaded water on Thursday amid a lack of both UK and Eurozone data releases.

At the time of writing, GBP/EUR traded at around €1.1859, virtually unchanged from Thursday’s opening rate.

The Euro (EUR) struggled to garner investor attention on Thursday, undermined by a surge in European Central Bank (ECB)
interest rate cut bets following several dovish speeches from ECB members.

Earlier in the week, ECB official Mārtiņš Kazāks commented on the need for more rate cuts, deeming them ‘more necessary’ and bolstering ECB rate cut bets as a result.

Following on from this, ECB member François Villeroy de Galhau echoed his colleague’s dovish rhetoric and stated that another ECB rate cut is ‘very likely’.

As inflation continues to cool within the Eurozone alongside an increase in dovish language from the central bank itself, markets are now pricing in two consecutive rate cuts this year, which hobbled the common currency on Thursday.

The Pound (GBP) found it challenging to advance against most of its counterparts on Thursday as the absence of significant economic data releases this week continued to weigh on Sterling's outlook.

Nevertheless, the Pound managed to tread water amidst this data void and despite a prevailing risk-averse market sentiment.

Typically, GBP exchange rates thrive in risk-on market conditions, yet Sterling remained resilient and maintained its footing despite Thursday’s thin trading conditions and gloomy market mood.

Looking ahead, the key driver for the Pound Euro exchange rate on Friday will likely be the release of the UK’s latest GDP figures.

The data is expected to show that the British economy grew by 0.2% in August, which could provide some modest support to GBP exchange rates if it meets forecasts.

As for the Euro, Germany will release its finalised inflation reading for September, which is forecast to confirm that inflation cooled below to ECB’s 2% target.

Should the data meet expectations, this will likely see a further rise in ECB rate cut bets and could see the common currency close the week on the back foot.

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TAGS: Pound Euro Forecasts