- Pound (GBP) falls after two days of gains
- UK economic outlook gloomy as inflation is set to rise
- Euro (EUR) rises after steep losses earlier in the week
- ECB minutes due, German IFO business climate & GDP data
The Pound Euro (GBP/EUR) exchange rate is holding steady on Thursday after losses in the previous session. The pair settled -0.25% lower yesterday, at €1.1837, after trading in a range between €1.1822 – €1.1896. At 05:45 UTC, GBP/EUR trades -0.01% at €1.1836.
The euro rose yesterday after two days of losses and even as the outlook for the region remains bleak. With gas prices still rising, inflation at a record high, and business activity contracting, there doesn’t appear to be much for the euro to cheer.
European energy ministers could hold an emergency meeting to discuss the jump in energy costs and the crisis looks set to deepen.
Today there is plenty of data for investors to focus on with the release of the minutes from the August ECB meeting, German Q2 GDP figures, and IFO business climate numbers.
The minutes come from the ECB meeting where the central bank hiked rates by 50 basis points, double market expectations. Investors will be keen to understand what prompted the ECB to take the move and where it sees interest rates going in September.
The GDP data is a second revision and therefore is less market moving than the initial reading. Meanwhile, the German business climate is forecast to fall back to a level last seen in the depths of the pandemic. Given the energy crisis, record inflation, and ongoing drought which is affecting trade the drop in business climate is not that surprising.
The pound fell in the previous session in a quiet session. The UK economic calendar was quiet on Wednesday, leaving sentiment to drive sterling.
The outlook for the UK economy is gloomy at best. Energy prices are soaring in the UK as they are in Europe, contributing to ever higher inflation. Analysts at Citibank see UK inflation rising to 18%, well above the BoE’s forecast of a peak at 13%.
Today there is no UK economic data leaving sentiment to drive the pound once more.