The Pound Euro (GBP/EUR) exchange rate has hit a new 17-month high since markets opened this morning, despite Germany posting a widening trade surplus in June.
What’s Been Happening: GBP/EUR Hits 17-Month High following BoE Decision
The Euro (EUR) struggled against the Pound (GBP) through the week, as mixed data from the Eurozone failed to cheer EUR investors.
German retail sales and the Eurozone’s manufacturing PMI beat forecasts early in the week, but both Germany’s and the Eurozone’s services PMIs were revised lower on Wednesday.
A sharp rebound in the US Dollar (USD) dented the Euro by way of the currencies’ negative correlation at the end of last week, with a surprise contraction in German industrial production also weighing on EUR.
Meanwhile, the Pound made some modest gains against the Euro at the beginning of the week, supported by generally upbeat data and falling UK Covid cases.
Sterling made more significant gains in response to the Bank of England’s (BoE) latest interest rate decision. Though policy remained unchanged, the BoE upwardly revised its inflation forecast and said that ‘some modest tightening of monetary policy’ may be necessary soon.
Though less hawkish than some had hoped, this statement still gave Sterling a boost, with GBP/EUR hitting a 17-month high.
Three Things to Watch Out for This Week
- Eurozone Economic Sentiment Index
The ZEW Economic Sentiment Indexes for both the Eurozone and Germany are expected to drop this month. Another fall in investor confidence could weigh on the Euro.
- German Inflation
German inflation is forecast to have surged from 2.3% to 3.8% last month. The Euro could climb if the CPI prints as expected.
- UK GDP Growth Rate
Sterling may strengthen towards the end of the week, as the UK’s GDP for the second quarter of this year is expected to have grown by 4.8%, after contracting last quarter by 1.6%.
The Pound Euro pair may fluctuate on the mixed European data for the first part of the week. Then on Thursday, with a number of UK data releases expected to be positive, Sterling could climb against the single currency.