GBP/EUR: Will Eurozone GDP Data Pull Euro Lower?
  • Pound (GBP) rises after the economy grows
  • BoE hiked rates by 25 bps
  • Euro (EUR) falls despite hot inflation from France / Spain
  • ECB’s hawkish tone supports the euro

The Pound Euro (GBP/EUR) exchange is rising after two days of losses. The pair fell -0.3% in the previous session settling on Thursday at €1.1457, after trading in a range between €1.1447 – €1.1549. At 07:35 UTC, GBP/EUR trades +0.25% at €1.1486. The pair is set to rise across the week, marking the fourth straight week of gains.

The pound is pushing higher after data UK showed GDP delivered a small game in the first three months of the year, reducing the likelihood of a recession. UK Q1 GDP rose 0.1% quarter on quarter, in line with forecasts.

However, data from the Office of National Statistics also shade that March is GDP contracted by 0.3% weighed down by strike action in the education and healthcare sectors.

Data comes after the Bank of England interest rate decision yesterday which saw the central bank hike interest rates by 25 faces points in line with forecasts. This marked the 12th straight interest rate rise and took the rate to 4.5%. The central bank kept the door open for a further rate hike in June if inflation remains sticky.

The BoE also upwardly revised the GDP outlook for the year, saying that it no longer expects the UK economy to fall into recession this year. Today’s Q1 GDP data supports the BoE’s more upbeat view.

There is no more high-impacting UK economic data due to be released today. Investors will look to a speech by BoE chief economist Phill Hue. Any comments surrounding inflation or monetary policy could influence the pound.

The euro is edging lower after hotter inflation data which showed that inflation in France ticked higher to 5.9% year on year in April from 5.7% in March. Meanwhile, Spanish inflation also ticked higher to 4.1% annually.

Broadly speaking, the euro remains supported by the hawkish outlook from the ECB after it raised interest rates last week and pointed to more hikes to come.