- Pound (GBP) falls as growth fears rise
- OECD sees UK growth stalling next year
- Euro (EUR) rises after GDP was upwardly revised
- ECB to signal a July rate hike
The Pound Euro (GBP/EUR) exchange rate is edging lower on Thursday. The pair settled -0.6% lower on Wednesday at €1.1702 after trading in a range between €1.1676 – €1.1769. At 09:45 UTC, GBP/EUR trades -0.16% at €1.1683.
The Pound came under pressure in the previous session amid growing concerns over the health of the UK economy. UK construction activity slowed to 56.4 in May, down from 58.2 in April, marking the lowest reading since January. Delving deeper into the figures, they revealed that the construction of new homes almost stalled as builders feared that the cost of living squeeze and rising interest rates would choke demand.
Separately the OECD warned about the economic outlook for the UK. The Paris-based organization expects UK economic growth to stall in 2023 as inflation is expected to keep rising. Under those conditions, the BoE could struggle to raise interest rates without sending the UK economy into recession.
There is no high impacting UK economic data due to be released today.
The euro rushed higher in the period after stronger than expected economic data. Data released revealed that the Eurozone economy grew at a faster pace than expected in the first three months of the year. GDP was upwardly revised to 0.6% quarter on quarter, upwardly revised from 0.3% as the preliminary reading and also up from 0.2% in the final quarter of 2021. On an annual basis, GDP was upwardly revised to 5.4% from 5.1%, according to Eurostat figures.
Attention now turns to the European central bank interest rate decision. The meeting comes as inflation in the region reached a record high of 8.1% in May. The ECB is not expected to hike interest rates at this meeting, but they are expected to signal a rate hike in the July meeting as the central bank needs to formally end bond purchases.
The ECB will also publish new staff projections for both growth and inflation.