The Pound Euro (GBP/EUR) exchange rate struck higher again last week. The bulk of these gains coming after revised GDP figures reported the Eurozone fell into a recession at the start of 2023.
What’s Been Happening: Euro Falters on Downwardly Revised GDP
The GBP/EUR exchange rate opened last week on the backfoot. The Pound (GBP) was undermined by a market correction, while the Euro (EUR) strengthened in response to comments by European Central Bank (ECB) President Christine Lagarde.
EUR exchange rates then stumble on the back of disappointing Eurozone data. With German factory orders, Eurozone retail sales and consumer inflation expectations all printing below expectations.
In contrast, Sterling was bolstered by an upwardly revised UK growth forecast from the Organisation for Economic Co-operation and Development (OECD).
The latter half of the week then saw the Pound Euro exchange rate propelled to its highest levels since September. The pairing’s ascent was initially driven by the Eurozone’s latest GDP release, after a revision to growth in the last quarter of 2022 and the start of this year showed the Eurozone slipped into a recession over the winter.
Meanwhile, the Pound’s gains were reinforced by Bank of England (BoE) rate hike bets.
Three Things to Watch Out for This Week
- ECB Interest Rate Decision
Centre Stage this week will be the ECB’s latest rate decision. A 25bps hike is priced in, but there are questions over the bank’s appetite for further hikes. If the ECB hints its tightening cycle is nearing an end, the Euro is likely to plunge.
- German ZEW Economic Sentiment
In the meantime, EUR exchange rates may be influenced by Germany’s latest ZEW survey. Will another deterioration in economic sentiment pull the Euro lower?
- UK Wage Growth
The UK’s latest jobs figures are expected to report a rise in unemployment in April. But will this be offset by a forecast acceleration in wage growth?
Pound Euro Outlook
The ECB’s rate decision and a number of high-impact data releases is likely to infuse some notable volatility into the Pound Euro exchange rate this week.