Will the GBP/EUR exchange rate recovery stagnate amid recession fears? » Future Currency Forecast


GBP/EUR exchange rate rises as investors look for a bargain

The Pound Euro (GBP/EUR) exchange rate strengthened this morning as GBP investors corrected course and reinvested in the oversold British Pound.

As of this writing, the GBP/EUR exchange rate is trading around €1.1479, up around 0.5% from this morning’s opening rate.

Can the British pound (GBP) maintain its fragile recovery?

The Pound (GBP) strengthens today as investors buy the dip, preparing for another week of trading.

From Thursday last week, the pound tumbled as the UK economic outlook darkened. The Bank of England (BoE) predicts a two-year recession, which it says has already started.

However, new demand for the pound has allowed it to recover ground today as investors corrected their greedy selling last week.

For the rest of the day, in the absence of meaningful data, the British Pound could see its recovery run out of steam.

Tomorrow, the GBP may see some movement in response to BoE policymaker Huw Pill’s speech. Investors could look to him for advice on the BoE’s future plans. If Huw’s rhetoric is hawkish, it could prolong the pound’s rally. However, if it looks more dovish – which is perhaps more likely – the GBP could lose some of its gains.

Will the Euro (EUR) be weighed down by developments in Ukraine?

The Euro (EUR) is trading in a wide range this morning, despite the release of positive data from Germany.

The eurozone’s largest economy, Germany, released its industrial production figures for September. The numbers were expected to rise from -1.2% to 0.2%, but instead climbed to 0.6%, giving the euro an unexpected boost, perhaps limiting its losses against the pound.

New developments in Ukraine may put pressure on the single currency today, as the country prepares for a new wave of attacks and blackouts.

Addressing the country last night, Ukrainian President Volodymyr Zelenskiy said:

“We also understand that the terrorist state is concentrating its forces and means for a possible repetition of massive attacks against our infrastructures.”

Looking ahead to tomorrow, the speeches and new data could give the euro further momentum. Andrea Enria of the European Central Bank (ECB) is due to deliver two speeches. If his tone is hawkish, that could support the euro, while more dovish rhetoric could limit the single currency’s rise.

Retail sales will likely also impact the move tomorrow. Eurozone sales are expected to have risen 0.3% in September after contracting 0.3% the previous month. If true, the euro could find new support on Tuesday. If the data misses forecasts, the single currency could face headwinds.

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