GBP/EUR exchange rate muted following German economic sentiment
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning following the publication of Germany’s latest ZEW economic sentiment index.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1897, virtually unchanged from this morning’s opening rate.
Pound (GBP) to dip following UK CPI?
The pound (GBP) is holding steady against the majority of its peers this morning as markets brace for the publication of the UK’s latest consumer price index.
Scheduled for release on Wednesday, the index is expected to show that headline inflation remained at the Bank of England’s (BoE) 2% target while core inflation is forecast to cool from 3.5% to 3.4%.
Should the data confirm that UK inflation continues to cool, this could further ramp up BoE rate cut speculation for August and undermine GBP in mid-week trade.
This will be followed in short order by the UK’s latest jobs report on Thursday. While unemployment is forecast to hold at 4.4% in May, analysts predict wage growth will have slowed over the same period.
This could reinforce BoE rate cut bets and pile even more pressure on the pound.
Euro (EUR) to fluctuate following ECB rate decision?
In the meantime, the euro (EUR) is struggling to catch bids morning following the publication of Germany’s ZEW economic sentiment survey for July.
The index printed fell from 47.5 to 41.8, missing expectations for a more modest drop to 42.5.
Morale in the Eurozone’s largest economy fell to a three-month low amid French political jitters and European Central Bank (ECB) policy uncertainty.
ZEW President Professor Achim Wambach, PhD commented:
‘For the first time in a year, economic expectations for Germany are falling. This is due to the sharper than expected decline in German exports in May, the political uncertainty in France and the lack of clarity about the ECB’s future monetary policy.’
The ECB will meet later this week ahead of its latest interest rate decision on Thursday.
No policy changes are expected from the bank this week, following its decision to cut rates at its previous meeting. Instead, markets will look to ECB officials for any further forward guidance regarding further cuts.
Should investors be met with a dovish consensus, EUR exchange rates could slump towards the latter stages of the week.
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