18 Nov 2024

EUR/GBP encounters difficulties as market participants anticipate a rate reduction from the European Central Bank (ECB) in December. The European Commission has projected a growth rate of 0.8% for the Euro Area in 2024, consistent with its earlier Spring forecast. UK economist Ruth Gregory predicts that the Bank of England (BoE) will keep interest rates unchanged at 4.75% in December. During the early hours of European trading on Monday, EUR/GBP remains steady around 0.8350. The currency pair is facing challenges as the Euro is under pressure due to the ECB's dovish stance, with expectations of a policy rate cut at the upcoming December meeting.

In its Autumn 2024 forecast, the European Commission maintains its growth projection for the Euro Area at 0.8% for 2024, while slightly adjusting the forecast for 2025 down to 1.3% from 1.4%. The Eurozone economy is anticipated to grow by 1.6% in 2026.

Regarding the economic outlook, EU Economy Commissioner Paolo Gentiloni stated, "With inflation continuing to decline and growth in private consumption and investment gaining traction, alongside record-low unemployment, we expect growth to gradually pick up over the next two years."

The UK economy recorded a 0.1% quarter-on-quarter growth in the three months ending in September, a slowdown from the 0.5% growth observed in the second quarter, and falling short of market expectations for a 0.2% increase. On a year-on-year basis, UK GDP increased by 1.0% in the third quarter, matching forecasts and improving from the 0.7% growth seen in the second quarter. However, on a monthly basis, GDP fell by 0.1% in September, reversing a 0.2% gain in August.

Ruth Gregory, Deputy Chief UK Economist at Capital Economics, reiterated the expectation that the Bank of England (BoE) will hold rates steady at 4.75% in December, with a 25-basis-point cut anticipated in February.