ExchangeRates.org.uk - At the time of writing, GBP/EUR traded at around €1.1794, virtually unchanged from Tuesday’s opening rate. The Euro (EUR) traded sideways against the majority of its peers on Tuesday after the publication of the Eurozone’s preliminary consumer price index confirmed a slowdown in June. June’s headline figure cooled from 2.6% to 2.5% as expected, while core inflation remained at 2.9%, in line with market expectations. However, signs of sticky services inflation cushioned any potential EUR losses on Tuesday, as the figure remained hot at 4.1%.
Kyle Chapman, FX markets analyst at Ballinger Group, said: ‘That’s enough to set in stone a pause at this month’s ECB meeting. The stickiness in services inflation may start to become a real concern for policymakers that puts a spanner in the works for rate cuts, particularly given the backdrop of rising wage growth and falling unemployment. There has been no concrete downtrend in services inflation this year, and the ECB isn’t likely to cut rates significantly until one emerges.’
Elsewhere, the single currency was also largely unmoved by the Eurozone’s latest unemployment rate, which held at record lows in May.
Pound (GBP) Quiet amid Lack of Data
The Pound (GBP) also treaded water against the majority of its peers on Tuesday as an absence of high-impact data saw GBP struggle to find a clear trajectory. Further undermining the Pound on Tuesday was the UK’s upcoming general election. As Kier Starmer’s Labour Party are largely favoured to win the upcoming general election coupled with the party’s commitment to fiscal responsibility, a Labour victory will likely bolster Sterling sentiment on Thursday. However, GBP investors were reluctant to place any overly aggressive bets ahead of the election, cautious of any potential last-minute surprises. As such, movement in the Pound is likely to remain limited until after the election on Thursday.
GBP/EUR Exchange Rate Forecast: Services PMIs in Focus?
Looking ahead, the primary catalyst of movement for the Pound Euro exchange rate this week will likely be the publication of both the UK’s and the Eurozone’s finalised services PMIs. Looking at the Pound, the UK’s services survey is forecast to slightly dip, however, is expected to remain deeply in expansion territory (a score over 50). With the services sector amounting to 80% of the UK’s economy, will an upbeat reading lift Sterling sentiment before the election? Turning to the Euro, the Eurozone’s services PMIs are also expected to remain in expansion territory, however, are also expected to marginally cool, which could lend the single currency some modest support during mid-week trade. Risk appetite could also impact the GBP/EUR exchange rate this week. Should upbeat trade prevail this week, GBP/EUR could strengthen. However, should markets opt for safer assets instead, GBP/EUR could be undermined.
This content was originally published on ExchangeRates.org.uk
