The Pound Euro (GBP/EUR) exchange rate slumped to an 18-day low last week as the UK cost-of-living crisis hit the country’s economy.
What’s Been Happening: GBP/EUR Tumbles to 18-Day Low as Income Crunch Dents UK Economy
The Euro (EUR) wavered against the Pound (GBP) early last week amid some mixed Eurozone trade data. While the bloc’s trade figures printed better than expected, they still showed a trade deficit.
Hawkish comments from multiple policymakers at the European Central Bank (ECB) saw the single currency strengthen midweek, despite some choppy trade. Two ECB officials signalled that a July rate rise is possible.
Then on Friday, an unexpected increase in the Eurozone’s composite PMI boosted EUR. The survey showed an uptick in growth, further fuelling ECB rate hike bets.
Meanwhile, GBP wobbled lower against EUR at the beginning of the week. A lack of data and the ‘partygate’ scandal pressured the Pound.
After slipping on Thursday, GBP was able to regain some ground following comments from Catherine Mann of the Bank of England (BoE). Mann hinted that a 50-bps rate rise was possible at the BoE’s next meeting.
But on Friday, GBP/EUR slumped to an 18-day low. UK retail sales contracted by 1.4% in March, versus the expected 0.3% contraction, while the UK services PMI also fell more than forecast. In response, economists warned that the country’s cost-of-living squeeze is throttling the UK economy.
Three Things to Watch Out for This Week
- German Consumer Confidence
With economists expecting another drop in German consumer morale, EUR could face some selling pressure.
- Central Bank Speeches
Both BoE Governor Andrew Bailey and ECB President Christine Lagarde are due to speak this week. Their comments could cause some movement in their respective currencies.
- Eurozone Inflation
Forecasters expect Eurozone inflation to have held steady in April. If it unexpectedly rises, the Euro may jump higher.
GBP/EUR Forecast
Data for the Pound is fairly thin this week so Sterling may be open to losses. If the Eurozone data surprises to the upside, we could see EUR/GBP strengthen significantly.