- Pound (GBP) is rising after losses yesterday
- Fiscal worries to limit gains in sterling
- Euro (EUR) falls despite Spanish GDP rising 0.8% QoQ
- ECB may have finished its rate-cutting cycle
The Pound-Euro (GBP/EUR) exchange rate rose on Friday, paring yesterday’s losses. The pair fell -0.17% in the previous session, settling on Thursday at €1.1435. It traded between €1.1420 and €1.1466. At 10:00 UTC, GBP/EUR trades +0.18% at €1.1455. The pair is set to fall -0.1% across the week.
While the pound rose on Friday, gains are likely to be limited amid ongoing fiscal concerns and macroeconomic worries. These factors have led the pound to its largest weekly loss against the US dollar in a month.
Investors are becoming increasingly concerned about Britain’s long-term finances, coupled with evidence of slowing momentum in the UK’s manufacturing and service sectors. This comes after a shock increase in the government’s public borrowing earlier this week and signs that global investors are shunning UK gilts after a week of government debt auctions.
The mood towards sterling appears to be deteriorating with weeks still to go until the November 26 budget.
The euro is under pressure on Friday, amid a relatively quiet economic calendar, which saw the release of Spanish GDP data.
The Spanish economy grew at a faster pace than expected, growing 0.8% quarter on quarter in the second quarter, beating forecasts of 0.7 and outpacing its eurozone peers.
Delving deeper into the data, all three major sectors of the economy — manufacturing, services, and construction — experienced strong growth. The economic rise coincided with a decline in the unemployment rate to 10.2% in the second quarter, marking the lowest level since 2008.
The strong economic activity in Spain contrasts with the broader eurozone, where GDP grew just 0.1% in the quarter, with Italy and Germany both contracting.
The Hero climbed across the week and remains broadly supported by expectations that the European Central Bank will not cut interest rates again. The market is currently pricing in just a 35% probability of a 25-basis-point rate cut before next June.
