- EUR/GBP has shifted its auction comfortably above 0.8700 ahead of UK Retail Sales.
- ECB Knot believes that the central bank needs to raise the policy rate at least two more times.
- The German economy has entered into recession after posting two consecutive GDP contractions quarterly.
The EUR/GBP pair has comfortably shifted above the round-level resistance of 0.8700 in the Asian session. The asset has gained significant strength as the European Central Bank (ECB) is expected to announce more interest rate hikes ahead to tame stubborn Eurozone inflation.
On Thursday, European Central Bank (ECB) policymaker Klaas Knot said that the ECB needs to raise the policy rate at least two more times, as reported by Reuters. He further argued that rates should stay put for a significant period of time following these increases.
Investors should note that ECB President Christine Lagarde has already announced that more than one interest rate hike is appropriate for stick inflationary pressures.
Considering Eurozone’s economic prospects, higher interest rates by the ECB have pushed the German economy into recession. On a quarterly basis, German Gross Domestic Product (GDP) contracted by 0.3% in the first quarter of CY2023. Investors should be aware that the nation also posted a contraction in Q4 last year of 0.5%. A consecutive quarterly contraction in GDP figures indicates that the economy is in a recession phase.
German Finance Minister Christian Lindner said on Thursday that comparing Germany with other highly developed economies, the economy was losing potential for growth, as reported by Reuters.
On the Pound Sterling front, investors are awaiting the release of the United Kingdom’s Retail Sales data (April). Monthly Retail Sales are seen expanding by 0.3% against a contraction of 0.9% reported last month. While annual Retail Sales are expected to contract by 2.8% vs. a contraction of 3.1%. A rebound in retail demand could fuel inflationary pressures and create more troubles for the Bank of England (BoE).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD battles 1.0700 after mixed Eurozone data
EUR/USD has come under renewed selling pressure, battling 1.0700 after mixed Eurozone Retail Sales data for April. The pair remains undermined by the cautious market mood, disappointing German Factory Orders and a broad US Dollar rebound.
GBP/USD turns south toward 1.2400 as US Dollar recovers
GBP/USD is heading south toward 1.2400, meeting fresh supply in the European session. The US Dollar is seeing renewed safe-haven buying amid a risk-off market profile, acting as a headwind to the pair.
Gold oscillates around $1,960 amid mixed responses to Fed’s June policy
Gold price is auctioning inside the woods around $1,960.00 in the early London session. The precious metal is displaying back-and-forth action as the investing community is divided about the interest rate decision by the Fed to be taken in June’s monetary policy meeting.
Is the metaverse hype back in action?
Although there are no major macroeconomic events this week, investors can expect massive volatility on a daily basis. The reasoning behind this outlook is that Apple will be conducting the 2023 Apple Worldwide Developers Conference (WWDC) on June 5.
Markets are likely to focus on ECB commentary
This is a very quiet week in terms of data and hence markets are likely to focus on last minute central bank commentary. The FOMC blackout period kicked off already on Sunday, but today we have a bunch of ECB speakers on the wires.