The Pound to Euro exchange rate edged lower in trade last week, in response to some lacklustre economic releases from the UK.
What’s Been Happening: Pound Retreats Against Euro Following Record Slump in GDP
The Pound initially opened last week on the offensive, rallying against a weakened Euro.
However Sterling’s gains almost immediately began to unravel with the publication of some mixed employment figures, as they revealed wages (excluding bonuses) contracted for the first time since 2001.
This retreat was then hastened by the release of the UK’s latest GDP estimate as the country fell into a recession with a record 20.4% contraction in the second quarter. Prompting Chancellor Rishi Sunak to warn that the UK is facing ‘hard times’.
The Euro, meanwhile, got off to a poor start last week as EUR investors grew increasingly unnerved by a spike in coronavirus cases across Europe.
The single currency was able to rebound later in the week, however, on the back of a positive ZEW economic sentiment index from Germany and a slump in the US Dollar (USD).
Three Things to Watch Out for This Week
1. UK and Eurozone PMIs
Acting as the main catalyst in the GBP/EUR exchange rate this week will be the latest PMI figures from both the UK and Eurozone. Will a positive reading from the UK and Eurozone bolster their respective currencies or will unemployment concerns temper any gains?
2. UK Inflation Rate
Also set to influence the Pound this week, will be the UK’s consumer price index. Will a stalling of inflation drag on Sterling sentiment as it puts more pressure on the Bank of England (BoE) to ease its monetary policy?
3. European Coronavirus Statistics
For EUR investors the focus remains on Europe’s battle with the coronavirus this week as surging cases suggest the continent is facing the dreaded ‘second wave’.
GBP/EUR Forecast
Looking ahead, the Pound to Euro exchange rate is likely to remain volatile this week in light of some notable data releases and renewed coronavirus jitters.