GBP/EUR exchange rate midweek update: pound lacks clear direction versus euro
The pound euro (GBP/EUR) exchange rate was trapped in a narrow range amid a lack of market-moving data from either side, bringing upcoming PMI prints into sharp focus for investors.
(21/10/2024 to 23/10/2024)
Monday
The pound euro (GBP/EUR) exchange rate gently meandered between the 1.19 and 1.20 levels following the publication of Germany’s latest producer price index (PPI).
German producer prices fell more than expected in September, declining 1.4% year on year from a previous reading of 0.8%. The 15th consecutive month of consumer deflation was attributed mainly to significantly lower energy prices.
A marginally risk-off market mood helped the single currency to remain buoyant despite the lacklustre economic figures from the Eurozone’s largest economy.
The pound struggled to attract investor attention amid a data-light calendar in the UK.
Tuesday
The pound was undermined by the UK’s latest public borrowing figures from the Office for Budget Responsibility (OBR), dipping below 1.20 benchmark against the euro before recovering.
The OBR revealed that UK public borrowing rose from £13.5bn to £16.6bn, well above a more modest £10.3bn estimate.
Wednesday
The pound euro rate softened following remarks from European Central Bank (ECB) President Christine Lagarde that lifted the single currency.
Lagarde emphasised the need for a cautious, data-driven approach to further rate cuts.
She stated that policymakers “are confident that the disinflationary path is underway and that we could continue to dial back the restrictive monetary policy, but we need to be cautious,” adding that “We need to be cautious because data will come up and will indicate to us what is the state of the economy, what is the state of inflation, of underlying inflation,"
Looking ahead
Both the UK’s and the Eurozone’s latest PMI data hits the headlines on Thursday.
If the UK services index for October confirms that the powerhouse sector remained in expansion territory (a reading above 50) and began to accelerate again, the pound could strengthen. The manufacturing index is also forecast to stay in expansion, likely offering some additional support.
Meanwhile, a mixed PMI print from the bloc could undermine the single currency. The services index is expected to remain just above the 50 threshold, while manufacturing is expected to stay firmly in the contraction zone.