The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range this morning amid a lack of data on both sides.
What’s Been Happening: GBP/EUR Surges on Hawkish BoE and Dovish ECB
The Euro (EUR) initially gained on the Pound (GBP) last week as mixed Eurozone data gave the single currency some modest support.
However, as the European Central Bank (ECB) decision loomed, the Euro softened. The ECB decided to slow its pandemic-era bond-buying rather than taper, which sent GBP/EUR to a three-week high.
Meanwhile the Pound fell to a six-week low against the single currency early last week, amid ongoing concerns about the UK’s supply chain crisis and the government’s controversial decision to raise national insurance contributions.
Hawkish comments from Bank of England (BoE) Governor Andrew Bailey then sent Sterling soaring to a three-week high against the Euro, where the Pound managed to hold its gains despite GDP for July stalling at 0.1%.
Three Things to Watch Out for This Week
- UK Employment Data
The UK unemployment rate is forecast to fall again in July from 4.7% to 4.6%. Along with some other positive predictions, this could boost GBP.
- UK Inflation Rate
Sterling may also be supported by the UK’s latest CPI, with inflation expected to surge to 2.9%. This could increase the likelihood of the BoE tightening monetary policy.
- Eurozone Balance of Trade
The Eurozone’s trade surplus for July is projected to have widened from €18.1bn to €30.2bn, which may increase the appeal of EUR – particularly in comparison to the UK’s growing trade deficit.
With UK data set to trump the releases from the Eurozone, both by volume and importance, the Pound Euro exchange rate might rise this week. However, domestic political and business news on both sides could introduce some volatility.