The Pound Euro (GBP/EUR) exchange rate struck higher last week amid strengthening Bank of England (BoE) interest rate expectations.
What’s Been Happening: Pound Euro Strengthened by Hawkish BoE Bets
The Pound (GBP) was initially muted against the Euro (EUR) last week, following weak manufacturing PMIs from both the UK and Eurozone.
GBP/EUR then began to firm on Tuesday. The Euro stumbled after data showed a surprise contraction in German exports. At the same time, Sterling was bolstered by an upbeat market mood.
The middle of the week saw the Pound gain momentum amid rising expectations the BoE will deliver another 50bps rate hike in August. While EUR exchange rates were pressured by weaker-than-expected Eurozone services PMI and PPI releases.
The uptick in GBP/EUR then accelerated through the second half of the week. BoE rate hike bets continued to underpin Sterling, despite ongoing fears the bank could tighten the UK into a recession.
Meanwhile, the Euro found some brief respite following an uptick in German factory orders, only for these gains to be unwound by disappointing industrial production figures.
Three Things to Watch Out for This Week
- UK Jobs Report
In the spotlight this week will be the UK’s jobs report. If May’s figures show wage growth remains elevated and unemployment held steady, this may bolster BoE rate hike bets and lift the Pound.
- UK GDP
Also set to influence GBP exchange rates will be the UK’s latest GDP figures. Will a sizable contraction in May stoke recession fears and dent Sterling sentiment?
- German Economic Sentiment
Germany’s latest ZEW survey may undermine the Euro this week. Analysts forecast economic sentiment will have deteriorated again this month.
Pound Euro Outlook
In addition to these high-impact data releases, movement in Pound Euro exchange rate may also be influenced by headlines around the NATO summit, in which Ukraine’s potential membership is set to dominate.