The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week, strengthening overall, as better-than-forecast data boosted the Pound (GBP).
Yesterday, the Euro (EUR) strengthened on a rise in German business confidence and hawkish comments from European Central Bank (ECB) President Christine Lagarde. Today, the Pound (GBP) is on the back foot after a sharp slowdown in service-sector activity.
What’s Been Happening: GBP/EUR Firms on Unexpectedly Strong Data
The Euro slipped on Monday after economic concerns in the Eurozone. The bloc’s trade balance unexpectedly printed at a deficit in March, while the European Commission slashed its 2022 growth forecasts from 4% to 2.7%.
The single currency regained some ground after Eurozone GDP growth beat forecasts for the first quarter of this year.
After wavering midweek, EUR then stumbled again as Eurozone consumer confidence remained near a 22-month low in May.
Meanwhile, the Pound climbed early in the week, supported by unexpectedly strong UK employment data. The unemployment rate fell to a 48-year low of 3.7% while average earnings (including bonuses) rose by 7%.
Cost-of-living fears pared Sterling’s gains, however, after UK inflation jumped from 7% to 9% – a 40-year high.
However, GBP/EUR held its ground and managed to rise further on Friday following an unexpected rise in UK retail sales. Rather than declining by 0.2%, as forecast, sales rose by 1.4% in April.
Three Things to Watch Out for This Week
- Flash PMIs
This month’s flash PMIs for both the UK and the Eurozone on Tuesday could cause significant movement. It looks as though last week’s rise in UK retail sales came at the expense of the services sector, which may weigh heavily on the Pound.
- German Consumer Confidence
With consumer morale in Europe’s largest economy forecast to remain near a 13-year low, EUR could struggle.
- Partygate Report
Sue Gray’s long-delayed report into illegal parties at No 10 Downing Street is due to be published this week. The political fallout could potentially hurt the Pound.
GBP/EUR Forecast
With some high-impact data releases and the potential for political volatility, GBP/EUR could trade in a wide range once again this week.