- Pound (GBP) is falling after 7-days of gains
- UK GDP showed 0.2% growth
- Euro (EUR) rises ahead of ECB minutes
- ECB Christine Lagarde’s comments will be watched
The Pound Euro (GBP/EUR) exchange rate is falling after 7-days of gains. The pair rose +0.08% in the previous session, settling on Wednesday at €1.1591 and trading in a range between €1.1568- €1.1615. At 08:35 UTC, GBP/EUR trades -0.14% at €1.1579.
The pound is heading lower as investors digest the latest UK GDP data, which showed that the UK economy returned to growth in August. The economy grew just 0.2% month on month after a sharp fall in July of 0.6% when wet weather and strikes saw the economy contract.
However, the growth in August is lacklustre at best as the economy deals with 14 straight interest rate hikes from the Bank of England, which has resulted in weak consumer spending and made it expensive for businesses to invest.
The data support the view that the Bank of England could leave interest rates on hold at 5.25% in September. Interest rate hikes from the Bank of England are still working their way through the UK economy, which means that the outlook for the second-half of the year remains sluggish and lacklustre. Recent PMI data still points to weakness in the UK economy as we head into the final quarter of the year, and the UK labour market is also showing signs of cooling.
Looking ahead, there is no high-impacting UK economic data to come Today or tomorrow, leaving the pound to be driven by sentiment.
The euro is pushing higher as attention turns to the minutes from the September ECB meeting. At the September meeting, the central bank raised interest rates to a record 4% and hinted that that was the end of the rate hiking cycle.
Recent ECB speakers have supported the view that the central bank has ended the monetary policy tightening cycle. Still, inflation in the region remains elevated, which does support the higher for longer interest rate outlook.
The minutes will be watched closely for clues and any signs of deviation from recent ECB member guidance.
