The Pound to Euro exchange rate rallied by around two cents last week to strike a new three-and-a-half-month high.
Sterling Surges 2 Cents
GBP/EUR began last week’s session around the 1.29 mark, remaining flat on Monday as German private sector results impressed but Eurozone PMI’s cooled slightly.
Sterling appreciated rapidly on Tuesday in response to reduced ‘Brexit’ bets following a poll from the Daily Telegraph. The broadsheet’s latest opinion poll gave the ‘Remain’ camp a 13-point lead, which prompted investors to send the Pound higher by around two cents against the single currency. The results proved especially supportive to the Pound because the Telegraph’s readership is generally viewed as having more of a Eurosceptic bias than other poll respondents.
Sterling also benefitted on Tuesday from Bank of England Governor Mark Carney’s assertion that rates would ‘probably’ rise if Britons vote to remain in the EU.
The Pound rallied to a fresh three-and-a-half-month high north of 1.32 on Wednesday as anti-‘Brexit’ sentiment continued to swell in Britain.
Pound Slips as GDP Downgraded
However, the Pound began to slide on Thursday as markets responded to data showing that annualised UK GDP actually came in at 2.0% in the first quarter, rather than the 2.1% initially reported.
Week Ahead
The most important economic releases to look out for this week are the UK PMI results and the European Central Bank’s policy decision.
The British private sector reports are anticipated to show that construction and services output increased during May but that manufacturing activity remained in contraction. Because the service sector accounts for over 70% of UK economic output the Pound is unlikely to budge unless we see a significantly higher or lower services PMI print.
The ECB’s June policy announcement is also unlikely to set any sparks flying, as policymakers are expected to leave policy on hold.
This means that GBP/EUR could easily retain a strong exchange rate of between 1.30-1.32 for the majority of this week’s session.
Heads Up
Summary of major upcoming data releases that we think may move the market.