The Pound Euro (GBP/EUR) exchange rate retreated last week, after the UK’s latest GDP figures reported domestic growth stagnated in February.
Last Week: Pound Euro Undermined by Disappointing UK GDP
The Pound Euro exchange rate traded sideways through the first half of last week as the extended Easter weekend resulted in thin trading conditions in both sides of the pairing.
The publication of the International Monetary Fund’s (IMF) latest forecasts also left the Pound (GBP) rangebound. While the IMF upgraded its growth outlook for the UK, it warned it will still be the worst performing G7 economy.
EUR sentiment began to strengthen in mid-week trade as the Euro (EUR) was supported by its negative correlation with the US Dollar, which fell sharply following the latest US inflation release. Meanwhile, hawkish signals from Bank of England (BoE) Governor Andrew Bailey helped the Pound to hold its ground.
The GBP/EUR exchange rate then plunged following the publication of the UK’s latest GDP figures. The Pound softened as domestic growth was reported to have stalled in February.
Hawkish comments from a European Central Bank (ECB) policymaker then lent additional support to the Euro at the end of the week. Although a resurgent US Dollar capped the single currency’s gains.
Three Things to Watch out for This Week
- UK Inflation
The UK’s consumer price index will be in the spotlight this week. Could another double-digit inflation reading bolster BoE rate hike bets and propel the pound higher?
- UK Jobs Report
Also in the spotlight for GBP investors will be the UK’s latest jobs report. Resilient wage growth in February could also strengthen Sterling sentiment.
- German Economic Sentiment
Meanwhile, EUR investors are likely to focus on Germany’s latest ZEW surveys. Will an improvement in economic sentiment this month help to propel the Euro higher?
Pound Euro Outlook
The UK’s and Eurozone’s latest PMI releases are also likely to influence the GBP/EUR exchange rate this week. These could disproportionately benefit the Euro amid forecasts the Eurozone service sector growth will outpace that of the UK.