Pound Euro Exchange Rate Outlook: GBP/EUR Steady After UK and German Data

October 16, 2024 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Outlook: GBP/EUR Steady After UK and German Data

The Pound Euro (GBP/EUR) exchange rate traded sideways on Tuesday following the publication of both the UK’s latest labour report as well as Germany’s most recent ZEW economic sentiment index.

At the time of writing, the GBP/EUR was trading at around €1.1991, virtually unchanged from Tuesday’s opening levels.

The Pound (GBP) maintained its ground against most currencies on Tuesday despite the UK’s latest employment report presenting a mixed picture.

The UK's unemployment rate outperformed expectations in August, falling to 4% from 4.1%, a low not seen since the start of the year.

However, the latest average earnings index (excluding bonuses) dipped from 5.1% to 4.9%, meeting market expectations but hitting a two-year low.

This decrease in regular wage growth saw a rise in Bank of England (BoE) interest rate cut bets, thus capping any potential advances for the GBP.

The Euro (EUR) saw little movement against most of its counterparts on Tuesday even as key economic data from the Eurozone's largest economy came in better than anticipated.

Germany’s latest ZEW economic sentiment index rose from 3.6 to 13.1 this month, marginally surpassing the projected figure of 10.

Nevertheless, the index remained relatively low, marking the second-weakest reading this year, and thus provided minimal backing for the single currency.

Looking forward, the primary catalyst for the Pound Euro exchange rate on Wednesday is expected to be the UK's upcoming consumer price index (CPI) release.

September's figures are expected to show a slowdown in both headline and core inflation, with headline inflation forecast to dip from 2.2% to 1.9%, and core inflation predicted to ease from 3.6% to 3.4%.

Should the data confirm that headline inflation has fallen below the Bank of England's 2% target, it may fuel speculation of a rate cut in November, potentially putting downward pressure on GBP exchange rates.

Shifting focus to the Euro, with scarce domestic data scheduled for Wednesday, EUR investors will likely turn their attention to a speech by European Central Bank (ECB) President Christine Lagarde.

With the central bank's next interest rate decision just two days away, any dovish remarks from Lagarde could bolster expectations of a rate cut, potentially weighing on the Euro.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts