- Pound (GBP) is unchanged after gains yesterday
- US-Iran headlines are mixed
- Euro (EUR) is flat but falls versus the USD
- IMF cuts Germany’s growth forecast
The Pound-Euro (GBP/EUR) exchange rate is unchanged after gains yesterday. The pair rose 0.14% in the previous session, settling on Tuesday at €1.1502. The pair traded between €1.1473 and €1.1517. At 13:30 UTC on Wednesday, GBP/EUR trades +0.00% at €1.1502.
The pound is unchanged against the euro but is falling against the US dollar as markets take stock of the latest developments in the Middle East and await further signs of a move towards peace.
Overnight, the US confirmed the Strait of Hormuz was completely closed before declaring it open today. President Trump also said he believes the war is sending mixed signals to the market.
The International Monetary Fund highlighted the UK’s vulnerability to elevated oil prices as a result of the war, revising GDP growth for this year down to 0.8% from the 1.3% mark, marking the largest downgrade for any G7 country. The IMF also lowered GDP growth to 1.2% for next year. Growth in the UK was already looking vulnerable even before the stagflationary impact of the war.
UK GDP data for February is due tomorrow and is expected to show 0.1% month-on-month growth after 0% growth in January.
The euro is unchanged against the pound and is falling against the US dollar as investors remain focused on the Middle East and oil prices, while shrugging off stronger-than-expected eurozone industrial growth.
Data showed that industrial production in the eurozone rose 0.4% month-on-month in February, recovering from a 0.8% contraction in January and beating expectations of 0.3% growth. However, investors have barely reacted to the data given the expected impact of the Iran war on the eurozone economy.
According to the IMF economic report, growth in Germany — the eurozone’s largest economy — was downgraded to 0.8% this year, down from 1.2%, owing to the impact of higher energy prices. This was the largest downgrade for any eurozone country.