The Pound Euro (GBP/EUR) exchange rate climbed last week as the UK fuel crisis eased and poor Eurozone data dented the single currency.
What’s Been Happening: GBP/EUR Firms as Disappointing Data Weighs on EUR
A series of negative data releases put pressure on the Euro last week, starting with a slowdown in service-sector growth as the Eurozone’s services PMI dropped from 59 to 56.4.
German factory orders for August then slumped by 7.7%, far worse than forecasts of a 2.1% drop, while industrial production printed at -4% versus -0.4%.
More poor data followed on Friday, with Germany’s trade surplus narrowing to a 16-month low of €10.7bn, compared with forecasts of €14.4bn.
Meanwhile, the Pound (GBP) firmed as the UK government deployed military drivers to help replenish fuel forecourts.
A better-than-predicted services PMI further supported Sterling, as the pace of service-sector expansion in the UK unexpectedly increased.
Towards the end of the week, hawkish comments from the new Bank of England (BoE) Chief Economist Huw Pill also boosted GBP. Pill said that inflationary pressures may last longer than initially thought, increasing the chances of an early rate hike.
Three Things to Watch Out for This Week
- UK Employment Data
Upcoming employment reports for July, August and September could buoy the Pound as the results are expected to be broadly positive.
- ZEW Economic Sentiment Index
Economic sentiment in Germany is forecast to fall again to a new lowest level since March 2020. If the results print as expected, the Euro could lose ground.
- UK GDP
The UK’s GDP report for August could cause sharp movement in the Pound. While month-on-month GDP is expected to improve, investors will be looking to see how the UK’s energy and supply crises are impacting growth.
With UK data expected to be more positive than Eurozone data this week, GBP/EUR may continue to firm. However, domestic economic headlines will also affect the pair and could introduce some volatility.