Pound-Euro could edge higher if German consumer confidence deteriorates, while hawkish BoE signals may help keep Sterling supported.
The Pound to Euro (GBP/EUR) exchange rate was left to trade at a one-week low on Thursday as markets welcomed a stronger-than-expected improvement in German business sentiment.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1625. A modest decline from the start of Thursday’s session.
Pound to Euro (GBP/EUR): 1.162464 (-0.06%)
Euro to Dollar (EUR/USD): 1.136681 (-0.13%)
DAILY RECAP:
The Euro (EUR) traded with modest support on Thursday morning as investors reacted to the release of Germany’s latest IFO business climate index.
September’s index outpaced expectations, suggesting that business sentiment in Europe’s largest economy is at its highest levels since May 2023, despite the pressures posed by higher energy prices.
However, the Euro’s upside potential ultimately remained limited by the single currency’s strong negative correlation with the US Dollar (USD), which continued to attract demand amid strengthening Federal Reserve interest rate hike speculation.
The Pound (GBP) held its ground on Thursday as ongoing UK economic jitters were offset by hawkish remarks from Bank of England (BoE) policymaker Clare Lombardelli.
Speaking at the Sixth Biennial Conference on Macroeconomic Policy in Warsaw, Lombardelli warned that persistent inflationary pressures stemming from the energy price shock will likely necessitate a tightening of monetary policy.
Lombardelli is one of the six members of the Monetary Policy Committee (MPC) who voted last week to leave interest rates on hold, so her hawkish remarks were interpreted as another sign the BoE may be gearing up to hike interest rates in November.
Near-Term GBP/EUR Forecast: Sliding German Consumer Confidence to Weaken the Single Currency?
Turning to the end of the week, the Pound Euro exchange rate may tick higher following the publication of Germany’s latest consumer confidence figures.
Household sentiment going into October is expected to have deteriorated again after a modest improvement in September, with rising energy prices and the prospect of higher interest rates likely to result in a more pessimistic outlook for consumers.
Meanwhile, in the absence of any notable UK economic releases, movement in the Pound is likely to be determined by wider market trends, with a cautious mood potentially weighing on Sterling sentiment.
Our currency coverage draws on live market data, official economic releases and published bank research.
