GBP/EUR exchange rate week review: pound subdued against euro ahead of Autumn Budget
The pound euro (GBP/EUR) exchange rate gently meandered between the 1.19 and 1.20 ranges following the release of mixed macroeconomic data from both sides.
(21/10/2024 to 25/10/2024)
Monday
The pound euro (GBP/EUR) exchange rate traded sideways through the bottom of the 1.20 range despite a lacklustre German PPI for September.
German producer prices declined more than forecast, posting a 15th consecutive month of consumer deflation amid lower energy prices.
A marginally risk-off market mood helped the single currency sidestep the underwhelming figures from the Eurozone’s largest economy.
Tuesday
The UK’s latest public borrowing figures from the Office for Budget Responsibility (OBR) deterred investors from the pound, causing it to slip below the 1.20 benchmark against the euro before recovering.
The OBR revealed that UK public borrowing spiked ahead of the budget, recording the third-highest September borrowing since monthly records began in January 1993.
Wednesday
The pound euro rate weakened to around 1.197 following a speech by European Central Bank (ECB) President Christine Lagarde that was imbued with monetary policy caution.
Lagarde said: “I hope that inflation will be back at target sooner than projected; inflation numbers are relatively reassuring, and disinflation is on the right track” but added that the central bank “can't jump to the conclusion that it's a done deal. Also, it doesn't mean that we will do 25 (rate cut) every time.”
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Thursday
The pound was initially subdued following the release of downbeat UK PMIs that showed both the manufacturing and services indices came in lower than expected in October but remained above the 50 threshold that separates expansion from contraction.
The pound euro exchange rate was awoken from its slumber amid risk-on flows that put the safe-haven single currency on the back foot – market optimism that allowed the increasingly risk sensitive pound to rise above 1.20.
Friday
The pound euro exchange rate hovered a fraction below the 1.20 benchmark following the publication of macroeconomic data from the UK and Germany.
The pound was stymied by the GfK’s latest consumer confidence index for September, with morale in the UK dropping from -20 the previous month to -21 – the lowest reading so far this year. The downbeat print was attributed to household concerns over the UK’s upcoming Autumn Budget which is expected to include a raft of tax cuts.
Germany’s latest IFO business climate index exceeded expectations in October, rising from the previous month’s eighth-month low of 85.4 to 86.5, outstripping a more modest 85.6 forecast.
Looking ahead
Economic data from both the UK and Germany at the start of the week will be closely watched by investors.
The UK’s latest CBI distributive trades survey hits the headlines on Monday, which could support the pound if the index reports another rise in October.
Meanwhile, the latest German GfK consumer confidence index for the month ahead could dent the euro if the sentiment gauge reports another uninspiring reading for November.