The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week. But ultimately ended the session at a three-week low amid UK economic jitters.
What’s Been Happening: Pound Euro Exchange Rate Finds Fleeting Gains on BoE Rate Hike Speculation
The Pound Euro exchange rate initially firmed last week. Hawkish Bank of England (BoE) rate hike expectations underpinning Sterling sentiment.
These BoE rate hike bets were fueled by stronger-than-expected UK inflation and wage growth releases.
Renewed cost-of-living fears prevented the Pound (GBP) from consolidating these gains in the middle of the week however.
Concerns over the economic consequences of widespread industrial action then triggered fresh selling pressure in the latter half of the week. Offsetting the publication of an upbeat retail sales print.
Meanwhile, the Euro (EUR) got off to a slow start last week, with EUR investors unnerved by headlines warning that falling water levels in the Rhine could disrupt Germany’s economy.
Despite the Eurozone’s latest GDP figures printing below expectations and EUR investors expressing concern over a potential European gas shortage, the Euro was able to rally against a weakened Pound through the second half of the week.
Three Things to Watch Out for This Week
- Eurozone PMIs
In the spotlight for EUR investors this week will be the Eurozone’s latest PMI figures. If August’s preliminary figures report another contraction in private sector growth, expect to see the Euro tumble.
- UK PMI
The UK will also release its latest PMIs this week. While activity in the UK’s private sector is expected to have been more robust than in the Eurozone, a slowdown in growth this month could still exert some pressure on the Pound.
- German Business Climate
Also influencing EUR exchange rates this week will be Germany’s IFO business climate index. Will another slump in business morale reflect poorly on the single currency?
GBP/EUR Forecast
Potentially infusing additional volatility into the Pound Euro exchange rate this week will be ongoing concerns over Europe’s looming energy crisis as well as UK political uncertainty.