Pound Euro Exchange Rate Weekly Forecast: GBP/EUR Strengthens on Disappointing Eurozone Data

The Pound Euro (GBP/EUR) exchange rate struck a new five-month high last week. The pairing strengthening on the back of some lacklustre EUR data releases.

What’s Been Happening: Pound Euro Firms as Eurozone Data Falls Short

The Pound Euro exchange rate got off to a strong start last week. The Euro (EUR) being undermined by a dramatic slump in Eurozone industrial production and the Pound (GBP) benefitting from an improving market mood.

GBP exchange rates then stumbled on Tuesday in response to the UK’s latest jobs report. A surprise uptick in unemployment and weaker-than-forecast wage growth weighed on Bank of England (BoE) interest rate expectations.

At the same time, the Euro also faltered as Germany’s latest economic sentiment index highlighted concerns the country is facing a mild recession.

A slightly cooler-than-expected Eurozone consumer price index then saw the GBP/EUR exchange rate rally again in mid-week trade.

Supporting Sterling’s ascent were comments from BoE Governor Andrew Bailey which suggested the door remains open for further interest rate hikes.

Offering the Euro some reprieve at the end of the week were remarks from European Central Bank (ECB) President Christine Lagarde. Lagarde said the ‘ECB will be courageous to take the decisions needed to bring inflation back to 2%.’

Three Things to Watch Out for This Week

  1. UK Inflation

The spotlight this week will be on the UK’s own CPI figures. Inflation is forecast to have fallen sharply in April. Will this weaken BoE rate hike bets and pull the Pound lower this week?

  1. UK PMIs

Also set to influence GBP exchange rates will be the UK’s latest PMIs. Could a slowdown in UK private sector growth also sap Sterling sentiment?

  1. Eurozone PMIs

The Eurozone will also publish its preliminary PMIs this week. These could have a similar impact on the Euro if they also report a moderation of private sector activity.

Pound Euro Outlook

Some high impact data releases could infuse notable volatility into the Pound Euro exchange rate this week. In addition to the data noted above we will also see the publication of the UK’s latest retail sales figures and German IFO business climate index.

Matthew Andrews

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