ExchangeRates.org.uk - At the time of writing, GBP/EUR was trading at around €1.1669, up around 0.2% from the morning’s opening level but still down from Wednesday’s high of €1.1726. The Pound (GBP) climbed on Thursday morning as the British currency drew support from the UK’s GDP figures for the second quarter of 2024. As expected, the UK economy continued to expand in the three months to June, with GDP growth printing at 0.6%. While this was a slight slowdown from the previous quarter’s 0.7%, it still represented a solid expansion as the country continues to recover from the mild recession suffered at the end of 2023. While some economists labelled the data ‘uninspiring’, others were more upbeat.
Analysts at Investec commented: ‘The political landscape is more stable than some of the UK’s allies, economic activity is much stronger relative to this point last year and the monetary policy easing cycle has commenced. When it comes to the UK, the sun appears to be breaking through the storm clouds.’
The data helped GBP claw back some losses after slumping on Wednesday in response to cooler-than-forecast UK inflation, which saw markets increase their bets on a September interest rate cut from the Bank of England (BoE). Although UK inflation accelerated in July, it came in below forecasts. Meanwhile, core inflation and services inflation both eased. Therefore, although the GDP figures boosted the Pound, it remained weaker than it was before the publication of the UK’s softer consumer price index.
Euro (EUR) Subdued in Absence of Economic Data
The Euro (EUR) struggled to resist losses against the Pound on Thursday as a lack of Eurozone economic data left the single currency vulnerable. In the absence of data, currency investors took their cues from the market risk appetite, with an upbeat mood dampening demand for the safer Euro. Markets are increasingly optimistic about the outlook for the world economy, with the Federal Reserve expected to follow in the footsteps of other key central banks and start cutting interest rates next month. Lower borrowing costs could help fuel global growth, and this prospect was cheering markets on Thursday. In addition, the Euro’s negative correlation with the US Dollar (USD) also muted EUR. USD seemed to stabilise after a rather bruising week, thereby removing a key pillar of support for the Euro.
GBP/EUR Exchange Rate Forecast: Recovering UK Retail Sales to Help Sterling Regain More Ground?
Looking ahead, Friday brings the UK’s retail sales figures for July – the final release this week after a slew of high-impact British data. British sales growth is forecast to have rebounded in July by 0.5% after June’s surprisingly steep drop of 1.2%. This modest recovery in consumer spending may be enough to lift GBP against EUR, although the upside could be limited. As for the Euro, Eurozone economic data remains thin on the ground, potentially leaving the single currency subdued at the end of the week. In the absence of any notable economic data from the Eurozone, risk appetite could influence the safer single currency. If an upbeat market mood prevails, the safe-haven Euro could struggle against the increasingly risk-sensitive Pound.
This content was originally published on ExchangeRates.org.uk
