Pound Euro Flat as German Inflation Fails to Lift the Euro

– Written by


Frank Davies

STORY LINK Pound Euro Flat as German Inflation Fails to Lift the Euro

The Pound Euro (GBP/EUR) exchange rate was little changed on Wednesday, as a quiet UK data calendar kept trading subdued ahead of Thursday’s GDP release.

At the time of writing, GBP/EUR was trading around €1.1705, leaving the pairing virtually flat for the day and close to Monday’s two-week high.

The Pound (GBP) was largely rangebound on Wednesday, with the lack of fresh UK economic releases leaving Sterling without a clear catalyst.

With little new data to shape expectations, GBP investors appeared hesitant to make significant changes to their positions, particularly with the UK’s second-quarter GDP figures scheduled for release on Thursday.

Sterling did find some support from expectations of higher Bank of England (BoE) interest rates, helping the currency hold its ground. Rising oil prices had strengthened bets that the BoE could opt to tighten monetary policy later this year.

The Euro (EUR) likewise struggled to establish a clear trend on Wednesday, with several competing influences leaving the single currency lacking momentum.

Germany’s final consumer price index for July confirmed that inflation in the Eurozone’s largest economy accelerated from 2.3% to 2.8%. However, the figures were unchanged from the preliminary estimate, limiting their influence on EUR.

The Euro also came under some pressure from its strong negative correlation with the US Dollar (USD), as the ‘Greenback’ edged higher.

Near-Term GBP/EUR Forecast: UK GDP in Focus for the Pound

Looking ahead to Thursday, the main event for Sterling will be the release of the UK’s second-quarter GDP figures.

The UK economy is expected to have lost some momentum while continuing to grow at a reasonable pace, with GDP forecast to rise by 0.4% in Q2, down from 0.6% in Q1. If the figures come in as expected, this could offer the Pound some modest support.

A significant deviation from expectations could trigger a more pronounced move for Sterling. A weaker-than-expected reading may drag on GBP, while a stronger result could give the Pound a notable boost.

For the Euro, attention will turn to the Eurozone’s latest industrial production data. Output is forecast to have stagnated in June, following a 0.2% contraction in May. Should the figures match expectations, the single currency may struggle to find much support.

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TAGS: Pound Euro Forecasts