- Pound (GBP) steady amid Brexit and supply chain concerns
- UK Q3 GDP due on Thursday
- Euro (EUR) steady despite surprise jump in German economic sentiment
- German inflation data due
The Pound Euro (GBP/EUR) exchange rate is pushing higher paring mild losses from the previous session. The pair settled just -0.08% lower on Tuesday at €1.1690 after rising as much as €1.1739 earlier in the session. At 05:45 UTC, GBP/EUR trades +0.12% at €1.1704.
The Pound traded relatively flat on Tuesday as it awaited its next catalyst, which is likely to come in from UK third quarter GDP data release on Thursday. Ahead of the release the National Institute of Economic and Social Research (NIESR) think tank warned over stagflation and sticky inflation over the coming years due to ongoing supply chain bottlenecks and Brexit headwinds.
Inflation in the UK is expected to reach 5% next year yet the UK economy is only expected to grow 1.7% in 2023 and 1.3% in 2024. The slower growth would come following 6.9% GDP in 2021 and 4.7% in 2022.
The think tank also sees lower EU immigration and reduced business investment owing to Brexit as limiting future growth and productivity.
Looking ahead there is no high impacting UK data due to be released today. Investors will look ahead to Thursday’s GDP print.
Separately the Euro failed to really take off on Tuesday despite a surprise rise in German ZEW economic sentiment data. The survey increased for the first time since May, climbing 9.4 points to 31.7 in November.
The data comes following the Sentix Eurozone economic confidence data yesterday which also improved, suggesting that the slowdown is expected to be temporary, and that economic growth will rebound in the first quarter of 2022. The data points to downside risks starting to stabilize in the Eurozone’s largest economy.
Looking ahead, today attention will be on German inflation figures. This is the final reading for October, so is unlikely to be as market moving as the initial reading. Analysts are expecting inflation to be 4.5% year on year in October, up from 4.1% in September.
Yet despite German inflation accelerating, the ECB have indicated that there is unlikely to be a turnaround until early next year.
