- Pound (GBP) is flat after 2-days of losses
- UK growth is revised lower to 0.4% in 2024
- Euro (EUR) is steady despite an improving economic outlook
- Eurozone manufacturing PMI shows ongoing contraction
The Pound Euro (GBP/EUR) exchange rate is holding steady after two days of losses. The pair fell -0.15% in the previous session, settling on Wednesday at €1.1692 and trading in a range between €1.1681 and €1.1701. At 10:00 UTC, GBP/EUR trades -0.01% at €1.1691.
The pound is holding steady despite disappointing news from the OECD, which considers that the UK will be the worst performer of the G7 major economies next year.
The OECD has revised its UK growth forecast to just 0.4% in 2024 before growing by 1% in 2025. This is a downward revision from the 0.7% forecast in November and also puts the UK behind Germany in 2025.
Meanwhile, it considers that inflation will be at 2.7% this year, the highest rate of inflation within the G7 group, before receding to 2.3% in 2025.
The OECD considers that the growth rate will be dampened by ongoing price rises in the service sector and a shortage of skilled staff.
The think tank also sees the Bank of England pushing back the first rate cut from to 2.25% until the third quarter on fears that price growth could rebound.
Meanwhile, the euro is also unmoved after manufacturing activity for the region confirmed the ongoing manufacturing recession. The eurozone manufacturing PMI was upwardly revised to 45.7, up from 45.6, but it was still well below the 50 level that separates expansion from contraction. The data shows that patience is required for an industrial recovery and highlights the growing division between the service sector and manufacturing.
Meanwhile, the OECD expects a recovery in the eurozone economy, and growth rates in France and Germany were upgraded. Germany’s growth is expected to pick up from 0.7% this year to 1.5% next year as lower inflation boosts household purchasing power. This was not revised from 0.6% to 1.3% previously forecast.
Looking ahead, attention Will be on a speech by ECB chief economist Philip Lane. Lane’s comments will be watched closely for further clues about the ECB’s future path for interest rates.
