January 21, 2025 – Written by Frank Davies
STORY LINK Pound to Euro: Subdued following Duo of Data Releases
The Pound Euro (GBP/EUR) exchange rate was mostly rangebound on Tuesday as Germany released its latest Zew economic sentiment index and the UK released its latest unemployment data.
At the time of writing, the GBP/EUR was trading at around €1.1835, virtually unchanged from Tuesday’s opening levels.
On Tuesday, the Pound (GBP) fluctuated widely against most of its trading partners, declining against some currencies while holding steady against others, in the wake of the UK’s latest employment figures.
UK unemployment saw a slight uptick in November, rising from 4.3% to 4.4%, contrary to expectations of no change. This development put downward pressure on GBP exchange rates.
However, the Pound received some support from the release of the latest average earnings index (excluding bonuses). The data showed that UK wage growth surpassed forecasts, increasing from 5.2% to 5.6% in November, slightly above the anticipated 5.5%.
Euro (EUR) Hobbled by German Sentiment Data
On Tuesday, the Euro (EUR) faced difficulty in gaining support and declined against most of its major peers following the release of Germany’s latest Zew economic sentiment index.
The data for January showed a drop in economic morale in the Eurozone’s largest economy, with the index falling from 15.7 to 10.3, which was worse than the modestly estimated 15.3.
This decline fueled expectations of an interest rate cut by the European Central Bank (ECB), leading to a weakening of the common currency during Tuesday’s European trading session.
GBP/EUR Exchange Rate Forecast: ECB Speech to Drive Movement?
Looking ahead to Wednesday, the main factor influencing the Pound Euro exchange rate will likely be a speech from ECB President Christine Lagarde.
With speculation growing about a potential ECB interest rate cut, any dovish remarks from Lagarde could further weaken the Euro due to increased expectations of a rate reduction.
On the Pound’s side, there will be no UK economic data releases on Wednesday, which means GBP exchange rates may struggle to find a clear direction during mid-week trade.
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TAGS: Pound Euro Forecasts
