GBP to EUR Exchange Rate Nears 32-Month Best Despite Chinese Euro Support

December 10, 2024 - Written by Tim Boyer

STORY LINK GBP to EUR Exchange Rate Nears 32-Month Best Despite Chinese Euro Support

The Pound to Euro exchange rate (GBP/EUR) has secured fresh support on Monday with an advance to 1.2085, close to key resistance just above 1.2100.

Any move to above 1.2110 would be a 32-month high for the pair.

The Euro has gained some protection from a monetary policy shift in China for the first time in 14 years with the Politburo stating that policy would be moderately losses compared with the current prudent stance. There was also the promise of increased fiscal support.

Wider Euro-Zone reservations still limited potential currency backing.

The Euro-Zone Sentix investor confidence index dipped to -17.5 for December from -12.8 previously and the weakest reading since November 2023.

Sentix noted further pessimism in Germany; “Following the announcement of new elections to the German Bundestag, there is no mood of optimism.”

Nordea maintains a cautious stance surrounding the outlook; “We continue to see the main risks to our Euro area growth and ECB forecast to the downside. So far, the labour market has held up well, but the continued weakness in the manufacturing sector risks leading to layoffs. The political situation in Germany and France could stay uncertain for a long time, and might not be resolved even after new elections.”

Nordea also sees financial risks; “A repricing of French banks credit could lead to further spillovers to the real economy and if the banks decide to reduce their balance sheet as a result of higher funding costs, it could be felt across a number of asset classes and currencies.”

ING expects a 25 basis-point ECB interest rate cut this week, but added; “although the press conference could potentially open the door to sub-neutral (i.e., less than 2.00%) policy rates next year. There certainly seem few reasons for the ECB to be cheerful right now, even though the hard data is holding up better than expected.”

According to MUFG immediate Euro downside should be limited; “Without a strong signal for a larger 50bps rate cut, we do not expect the policy meeting to trigger another leg lower for the euro heading into year end.”

As far as the UK economy is concerned, the latest Recruitment and Employment Confederation/KPMG survey reported that demand for workers in Britain fell sharply after the October budget.

The staff demand index dipped to the lowest level since August 2020 while permanent staff placements saw the fastest decline since August 2023.

REC Chief Executive Neil Carberry commented; "It should be a surprise to no-one that firms took the time to re-assess their hiring needs in November after a tough budget for employers,"

He added; "The real question now is whether businesses will return to the market as they go into next year with greater certainty about the path ahead."

KPMG UK group chief executive Jon Holt was slightly more positive; “expected interest rate cuts in 2025 and the government's investment plans offered reasons for optimism. This should give businesses greater confidence which may help stabilise the labour market."

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