Euro Tumbles in Response to Dovish ECB, Pound Buoyed by Strong Economic Releases

GBP/EUR Exchange Rate: Pound Bolstered by Upbeat Data Releases 

The Pound Euro (GBP/EUR) exchange rate has trended broadly higher over the past week, with the pairing largely climbing higher through the end of last week on the back of a weaker Euro. 

Sterling has been able to carry some of this momentum through to this week, in response to some upbeat UK data releases. 

The GBP/EUR exchange rate briefly managed to strike its best levels since mid-August, in the wake of a robust jobs report, which pointed to some of the slack in the labour market starting to improve in July. 

However, the Pound was unable to sustain these gains for long, with GBP/EUR quickly retreating from its best levels amid ongoing Brexit concerns. 

A record jump in UK inflation looks to have put the spring back in Sterling’s step for now, but it remains to be seen if this can be translated into any lasting gains for the Pound. 

GBP/USD Exchange Rate: Sterling Falters amidst Uncertain Outlook 

Broad US Dollar weakness allowed the GBP/USD exchange rate to rally through a large part of last week’s session. 

However, despite the Pound attempting to extend this upside this week in response to the UK’s upbeat data releases, Sterling has struggled to consolidate its gains. 

This comes as GBP investors remain worried about the UK’s economic lookout through the last quarter of 2021, particularly in the face of elevated coronavirus cases and warnings from the government that Covid remains a risk this winter. 

Looking ahead, the Pound could attempt to rally again later this week on the back of the UK’s latest retail sales release, as economists forecast sales growth will have rebounded in August. 

USD/GBP Exchange Rate: US Dollar Fluctuates amidst Mixed Market Sentiment 

The US Dollar traded in a wide range over the past week, in response to fluctuating market risk appetite. 

This saw USD exchange rates tumble last Thursday as market sentiment improved, before a gloomy end to the week saw the US Dollar claw back some of its losses. 

The start of this week then saw the ‘Greenback’ remain in demand, as investors were spooked by the prospect of US inflation remaining elevated at a time when the wider US economic recovery looks to be slowing. 

However, the actual release of the US consumer price index then led to a brief drop in USD exchange rates after revealing US inflation slowed for the first time in 10 months. 

While the US Dollar quickly rebounded again as concerns over China’s economy soured market sentiment, the ‘Greenback’ could face another setback later this week as the latest US retail sales figures are expected to report another contraction in sales growth last month. 

EUR/USD Exchange Rate: Euro Undermined by a Dovish ECB 

The EUR/USD exchange rate stumbled over the past week, as the Euro has struggled to attract support in the wake of the European Central Bank’s (ECB) latest interest rate decision. 

While the ECB announced plans to begin slowing the pace of its pandemic emergency purchase programme (PEPP), EUR investors were dismayed by the bank’s dismissal of any tapering talk. 

These losses were then extended at the very end of last week as the ECB’s dovish stance was reiterated in a speech by President Christine Lagarde. 

The Euro continued to face pressure in the first half of this week as EUR sentiment was shaky by uncertainty ahead of Germany’s general election later this month. 

Looking ahead, while the EUR/USD exchange rate has rebounded from its worst levels thanks to a bout of USD weakness, the pairing may struggle to hold its ground over the coming week, particularly if Lagarde continues to reaffirm the ECBs commitment to highly accommodative monetary policy in an upcoming speech.