The Pound to Euro exchange rate fell sharply last week, in response to some lacklustre economic data from the UK.
What’s Been Happening: Pound Slumps on Poor Data
The Pound plummeted against the Euro last week, largely on the back of some underwhelming economic data.
This was mostly attributed to the UK’s latest GDP figures, which revealed domestic growth was slower-than-expected in May, dampening hopes for a V-shaped recovery this year.
While a surprise uptick in inflation helped to temper Sterling’s losses through the second half of the week, the GBP/EUR exchange rate still closed the session at a two-week low as Bank of England (BoE) Governor Andrew Bailey warned of an ‘uneven’ economic recovery.
The Euro, meanwhile, enjoyed a strong start to the session this week, as EUR investors welcomed a report from Germany’s government claiming the country had ‘passed its lowest point’.
The single currency then consolidated these gains through the second part of the week as the European Central Bank (ECB) concluded its latest policy meeting by keeping its monetary policy untouched, ahead of a critical EU summit.
Three Things to Watch Out for This Week
1. EU Summit
Likely dominating the agenda at the start of this week will be the critical EU summit discussing the EU’s coronavirus recovery fund, at it stretches into its fourth day. There is some optimism that a compromise deal could be found today, an outcome which is likely to support the Euro.
2. Eurozone and UK PMIs
Also, in the spotlight this week will be July’s preliminary PMI figures from both the Eurozone and UK. Friday’s data may prove supportive of both the Euro and Pound amidst forecasts private sector growth will have turned positive again this month.
GBP investors will also be keeping an eye on the latest round of Brexit talks. Will a breakthrough be found or will a lack of progress continue to weigh on Sterling sentiment?
Looking ahead, should the EU reach an agreement on its coronavirus fund its likely we could see the GBP/EUR exchange rate extend its slide this week.