The Pound Euro (GBP/EUR) exchange rate struck a one-month low last week, amid erratic trade linked to UK economic uncertainty.
What’s Been Happening: Pound Euro Undermined by UK Economic Jitters
The Pound (GBP) initially ticked higher last week. However, these gains proved fleeting, with Sterling quickly retreating amid renewed concern over the UK’s economic trajectory.
Meanwhile, hawkish remarks from European Central Bank (ECB) President Christine Lagarde at the start of the bank’s annual Sintra Forum helped underpin the Euro (EUR) at the start of the week.
Lagarde was joined by Bank of England (BoE) Governor Andrew Bailey for a panel on Wednesday. Both struck a hawkish tone, but while Lagarde’s comments bolstered the Euro, Bailey’s remarks had an adverse impact on the Pound.
In suggesting the BoE would ‘do what is necessary’ to return inflation to target, Bailey stoked fears the bank could tighten the UK into a recession, plunging GBP/EUR to a one-month low.
The Euro then gave ground in the second half of the week, with a weaker-than-expected Eurozone inflation print and its negative correlation with the US Dollar (USD) infusing volatility into the single currency.
Three Things to Watch Out for This Week
- German Industrial Data
Germany’s latest industrial data will be in the spotlight for EUR investors this week. Will an expansion in factory orders and industrial production help to boost the Euro?
- UK and Eurozone PMIs
June’s finalised PMIs could strengthen the GBP/EUR exchange rate in the first half of the week, as they look set to confirm the UK’s private sector outperformed that of the Eurozone’s at the end of the second quarter.
- UK Economic Concerns
In the absence of any other GBP data of note, could ongoing UK economic jitters leave the Pound facing additional headwinds this week?
Pound Euro Outlook
Movement in the Pound Euro exchange rate may remain volatile this week, in the face of lingering UK economic uncertainty and mixed Eurozone data releases.