A triple-whammy of underwhelming UK private sector data sent the Pound tumbling by around a cent versus the Euro last week.
Pessimistic PMIs Send Sterling Tumbling
The Pound to Euro exchange rate trended lower last week as traders reacted to a downbeat trio of UK private sector PMI results.
The British manufacturing index dipped from 56.3 to a three-month low of 54.3 in June, with demand cooling both at home and abroad. The Eurozone equivalent score printed at a six-year high of 57.4.
Construction output slid from 56.0 to 54.8 in June, while the highly influential service sector dropped from 53.8 to a four-month low of 53.4.
Analysts noted that uncertainty surrounding the snap election and the beginning of the official Brexit negotiations in June probably contributed to the poor private sector performance.
Hawkish ECB Signals Boost Single Currency
Sterling slumped to a one-week low versus the single currency on Thursday as investors reacted to the minutes report from the latest European Central Bank meeting, which showed that policymakers were thinking about slowly removing stimulus.
The minutes revealed that officials were unlikely to increase the bank’s €2.3 trillion quantitative easing scheme and this boosted demand for the Euro.
GBP/EUR continued to weaken on Friday in response to a worse-than-expected UK industrial production score of -0.1%, which disappointed forecasts of +0.5%. The single currency, meanwhile, was bolstered by a massive 5.0% year-on-year jump in German industrial output.
GBP EUR Week Ahead
The Pound has struggled against the Euro so far this week. Traders had hoped that Bank of England deputy governor Ben Broadbent would voice his opinions regarding an interest rate at a speech in Scotland.
However, Broadbent focussed on trade dynamics, flagging that Brexit could impact the domestic economy. By not mentioning monetary policy, most analysts concluded that the BoE deputy governor was signalling that he does not intend to vote for a change in interest rates at the next MPC meeting and this sent GBP/EUR lower.
The standout data release to look out for is Wednesday’s UK labour market report, which is anticipated to see the headline jobless rate remain at a multi-decade low. However, wage growth is predicted to have slowed in May and this could easily pile more pressure on the embattled Pound.