The Pound Euro (GBP/EUR) exchange rate fell back last week, as Sterling failed to sustain its initial rally, in spite of some positive UK data releases.
What’s Been Happening: Pound Euro Slumps despite Positive UK Data
The Pound got off to a strong start last week, with Sterling rallying on the back of a wave of optimism which swept through markets on Monday.
But this proved to be short lived as a souring of market sentiment almost immediately prompted some profit taking, in spite of data revealing a surprise fall in domestic unemployment.
Adding further pressure was a weaker-than-expected inflation reading on Wednesday, as well as warnings from health experts that the UK could face a ‘summer surge’ of coronavirus infections as more restrictions are eased.
While the UK’s latest retail sales and PMI figures then beat expectations, this was not enough to prevent another downturn in GBP/EUR at the end of the week.
Meanwhile, Europe’s improving vaccine rollout left the Euro well positioned to claw back its initial losses against the Pound last week.
Accelerating this recovery was a cautiously optimistic outlook from the European Central Bank (ECB) following its latest rate decision on Thursday, with the Euro then extending its gains at the end of the session on the back of some upbeat PMI figures and a drop in the US Dollar.
Three Things to Watch Out for This Week
- Eurozone GDP
Acting as the main catalyst in the Pound Euro exchange rate this week will be the publication of the Eurozone’s latest GDP figures. The preliminary figures are likely to report another contraction of growth in the first quarter, confirming the bloc suffered another double-dip recession and pressuring the single currency.
- Eurozone Inflation
Also influencing EUR exchange rates this week will be the Eurozone’s latest CPI release, with a bump in inflation this month potentially helping to temper any losses in the Euro.
- Scottish Politics
In the absence of any notable UK data, GBP investors may turn their focus to Scotland’s upcoming parliamentary election, amidst concerns a strong showing by the SNP could threaten the Union.
Pound Euro Forecast
The latest Eurozone GDP figures will no doubt be the main focus for investors this week, and could potentially help to bolster the Pound Euro exchange rate, if growth in the bloc disappoints.