A sharp downturn in November’s Eurozone services PMIs encouraged the GBP/EUR exchange rate to push higher at the start of the week.
Last Week: Falling Eurozone Consumer Confidence Weighs on Euro Appeal
Support for the single currency remained limited in the wake of Friday’s fresh dip in the Eurozone consumer confidence index.
With signs increasingly pointing towards the currency union experiencing a double-dip recession before the year is out the appeal of the Euro naturally diminished.
On the other hand, the mood towards the Pound improved thanks to unexpected growth in October’s monthly UK retail sales figure.
As strong levels of consumer spending have previously helped to shore up the economy in the face of negative headwinds the 1.2% monthly increase encouraged the GBP/EUR exchange rate to rally.
Three Things to Watch out for This Week
1. German IFO Business Sentiment Survey
Further losses could be in store for EUR exchange rates on Tuesday as forecasts point towards a fresh decline in the German IFO business sentiment survey indexes.
As long as business sentiment within the Eurozone’s powerhouse economy continues to deteriorate worries over the economic outlook seem set to increase, to the detriment of the Euro.
2. Office for Budgetary Responsibility Economic and Fiscal Forecasts
Worries over the outlook of the UK economy could pick up once again, though, if the OBR’s latest set of forecasts prove dovish in nature.
If forecasts point towards the UK economy shedding further momentum in the final months of the year, and a longer path to recovery, this could weigh heavily on the GBP/EUR exchange rate.
3. European Central Bank Meeting Minutes
While markets already widely expect the European Central Bank (ECB) to announce fresh monetary action at its December meeting the release of its previous meeting minutes could still provoke some volatility.
Any marked increase in dovishness and concern over the economic outlook on display in the minutes may bias the Euro to the downside this week.
GBP/EUR Outlook
Fresh evidence of growing weakness within the Eurozone economy could encourage the GBP/EUR exchange rate to extend its gains in the days ahead, especially if the latest ECB minutes prove dovish.