Pound Euro (GBP/EUR) Exchange Rate Bounces off 12-Week Low

November 18, 2024 - Written by Tim Boyer

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Bounces off 12-Week Low

The Pound Euro (GBP/EUR) exchange rate fell to a 12-day low on Monday morning, before regaining some losses, amid a souring market mood.

The Pound (GBP) initially faced challenges on Monday, slipping against safer peers as a deteriorating market mood weighed on the increasingly risk-sensitive currency.

Meanwhile, certain UK economic news stories added pressure to the Pound in the absence of significant data releases.

One notable report came from the CEBR thinktank, which cautioned that the tariffs proposed by President-Elect Donald Trump on US imports could reduce the UK economy by 0.9% by the end of his term.

Additionally, there were concerns that measures from Labour’s Autumn Budget could increase company insolvencies and negatively impact wage growth, potentially harming the UK economy and leading to lower interest rates.

These developments initially dented the Pound on Monday, with GBP/EUR declining, although Sterling managed to bounce off its lowest levels and even rise against riskier rivals.

Meanwhile, the Euro (EUR) gained from the slightly risk-averse market sentiment and its positive correlation with a weaker US Dollar (USD).

The apprehensive atmosphere was fuelled by escalating tensions in the Russia-Ukraine war, following outgoing US President Joe Biden's authorisation for Ukraine to use US-donated weapons to strike within Russian territory.

This move raised fears that the conflict, now in its third year, could escalate into a broader confrontation.

Looking forward, the Pound may see subdued trading during the first half of the week due to a lack of data, with GBP investors likely to adopt a wait-and-see approach ahead of the UK consumer price index (CPI) release on Wednesday.

The CPI is anticipated to reveal that headline inflation quickened from 1.7% to 2.2% in October, surpassing the Bank of England's (BoE) 2% target. This could provide a midweek boost to Sterling, although a disappointing reading could see the Pound retreat.

Meanwhile, the Eurozone's economic calendar is also light on market-moving data. Tuesday's final inflation figures for October are unlikely to spark much movement, unless they deviate from preliminary estimates.

Consequently, GBP/EUR may be driven by market risk sentiment, with the pair potentially dipping if the risk-averse mood continues.

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TAGS: Pound Euro Forecasts