The Pound Euro (GBP/EUR) exchange rate trended higher last week. The pairing striking a two-week high as Eurozone GDP fell short of expectations.
What’s Been Happening: Pound Euro Jumps on Lacklustre Eurozone GDP
The Pound Euro exchange rate traded in a narrow range through the first half of last week.
The Pound (GBP) was initially subdued amid signs of weakness in the UK industrial sector. While the Euro’s (EUR) negative correlation with the US Dollar (USD) left it on the defensive.
The GBP/EUR exchange rate continued to trade sideways in the middle of the week. The Euro found purchase in response to hawkish comments from a European Central Bank (ECB) policymaker. But this was offset by an uptick in the Pound amid rising Bank of England (BoE) rate hike bets.
The Euro then began to give some ground in the second half of the week after the Eurozone’s latest economic sentiment index printed below forecast.
However, the bulk of the single currency’s losses were reserved for the very end of the session. The GBP/EUR exchange rate skyrocketed as the Eurozone’s latest GDP estimate suggested the bloc’s economy only narrowly avoided stalling in the first quarter of 2023.
Three Things to Watch out for This Week
- ECB Interest Rate Decision
The spotlight this week will undoubtedly be the ECB’s latest interest rate decision. Markets are pricing in a 25bps increase this month, but there remains an outside chance of a 50bps hike. Expect the Euro to soar if the bank opts for the latter.
- Eurozone Inflation
In the meantime, the publication of the Eurozone’s consumer price index may bolster ECB rate hike expectations and lift the Euro after reporting an uptick in inflation last month.
- German Factory Orders
Closing out the week will be the publication of Germany’s latest factory orders release. Will a contraction in order growth lead the euro to end the session on a sour note?
Pound Euro Outlook
In terms of UK data, April’s finalised services PMI may be the only release of note. But barring a major divergence from the preliminary figures they may have only a very limited impact on the Pound Euro exchange rate.