GBP/EUR exchange rate midweek update: pound jumps to fresh 29-month high versus euro
The pound euro (GBP/EUR) exchange rate struck a multi-month high amid heightened European Central Bank interest rate cut speculation.
(30/09/2024 to 02/10/2024)
Monday
The pound euro (GBP/EUR) exchange briefly jumped to a fresh 29-month high around 1.202, after cooling German inflation increased European Central Bank (ECB) interest rate cut speculation.
The German consumer price index revealed that inflation in the Eurozone’s largest economy eased more than expected last month, dipping from 1.9% to 1.6%, its lowest level since February 2021 – spurring bets on another rate cut from the ECB in October.
This marked a rebound for the pound in the wake of the UK’s latest GDP figures earlier in the European session, which showed that the UK economy grew less than forecast in the second quarter.
The domestic economy expanded 0.5% in the second quarter, down from an earlier estimate of 0.6% and decelerating from the 0.7% growth in the first quarter.
Tuesday
The pound euro rate was trapped in a narrow range a whisker above the 1.20 benchmark following the latest consumer price index from the bloc.
Eurozone headline inflation cooled more than expected in September, with the index falling slightly more than expected from 2.2% to 1.8%. Core inflation also cooled in September, with the index easing from 2.8% to 2.7%.
This came hot on the heels of the German inflation data on Monday, putting further pressure on the euro amid mounting ECB interest rate cut speculation.
The pound also found itself on the back foot as the UK’s finalised PMI for September printed in line with market expectations, cooling from 52.5 to 51.5 – the lowest level in over four years amid concerns over the upcoming Autumn Budget.
Wednesday
The pound euro rate was given a marginal uplift after the unemployment reading for the Eurozone held steady at record lows in August, printing in line with market expectations at 6.4%.
A lack of fresh UK data releases meant the risk-sensitive pound traded without a clear trajectory, despite a return to upbeat trade following the previous day’s risk-off mood amid escalating tensions in the Middle East.
Looking ahead
The UK’s and the Eurozone’s finalised services PMI for September hit the headlines on Thursday.
For the UK, the all-important services sector is forecast to report a decrease in activity but remain firmly in expansion territory (a reading above 50), which could support the pound.
The Eurozone’s services index is forecast to report a deeper dip, taking it closer to the 50 threshold that separates expansion from contraction – an outcome that could undermine the euro.