The Pound Euro (GBP/EUR) exchange rate fell sharply last week, in response to some lacklustre UK data and a rise in domestic coronavirus cases.
What’s Been Happening: Pound slumps on disappointing UK data
The Pound was met by some aggressive selling last week as GBP investors were left unimpressed by some high-profile UK data releases.
This was kicked off with the publication of the UK’s latest employment figures, which despite printing above expectations, were unable to counter concerns that the end of the government’s furlough scheme might see unemployment start to rise again.
This was then followed by the UK’s consumer price index which reported domestic inflation cooled more than expected last month, further souring Sterling sentiment as it prompted investors to dial back expectations the Bank of England (BoE) could tighten its monetary policy in the near-term.
The week was then capped off by the UK’s latest retail sales release, where a shock contraction of sales growth, coupled with a worrying rise in domestic coronavirus cases added to Sterling’s plight.
Meanwhile, the Euro was supported by some robust GDP and inflation figures last week, but found its gains capped by its strong negative correlation with the US Dollar (USD).
Three Things to Watch Out for This Week
- Eurozone and UK PMIs
Acting as a key catalyst for both the Pound and Euro this week will be publication of their respective PMIs, with a more robust expansion in the Eurozone’s private sector potentially weighing on the Pound Euro exchange rate at the start of the week.
- ECB Minutes
The Euro could face some headwinds in the latter half of the week, with the publication of the minutes from the European Central Bank’s (ECB) July policy meeting. Will a reaffirming of the ECB’s dovish bias weaken the single currency?
- UK Coronavirus Statistics
Should UK coronavirus cases continue to rise, we could see the Pound come under additional pressure this week.
Pound Euro Forecast
Looking ahead, rising UK coronavirus cases and a further souring of market sentiment could see the Pound Euro exchange rate face headwinds again this week.