The Pound Euro (GBP/EUR) exchange rate briefly struck a 10-month high last week. The spike in Sterling being triggered by the UK’s latest wage figures.
What’s Been Happening: Pound Euro Rocked by UK Wage Figures
The Pound (GBP) initially fell against the Euro (EUR) this week. Sterling sentiment was sapped by a risk-off market mood. Before hawkish comments from Bank of England (BoE) Governor Andrew Bailey, helped to right the ship.
Above forecast UK wage figures then catapulted GBP/EUR to a 10-month high. A record rise in average earnings was seen as reinforcing expectations for another 50bps rate hike from the BoE in August.
At the same time, the Euro was pressured after German economic sentiment fell to a seven-month low.
The GBP/EUR exchange rate then plunged around a cent in mid-week trade. This came as the Euro benefitted from its negative correlation with the US Dollar (USD). Which crashed in response to another softer-than-expected US inflation print.
A stronger-than-expected UK GDP print then offered some support to the Pound on Thursday. But this was not enough to prevent GBP/EUR closing the week lower.
Three Things to Watch Out for This Week
- UK Inflation Rate
Centre stage this week will be the UK’s consumer price index. If inflation prints higher than expected, this may further boost BoE rate hike bets. On the other hand, renewed recession fears could pressure the Pound.
- UK Retail Sales
Also set to influence GBP exchange rates will be the UK’s latest retail sales figures. Will a softening of sales growth weaken Sterling?
- Eurozone Inflation
The Eurozone will also publish its latest CPI figures this week. But unless there is some divergence from the preliminary reading, June’s finalised figures may have a limited impact on the Euro.
Pound Euro Outlook
Movement in the GBP/EUR exchange rate may also be influenced by the publication of the Eurozone’s latest consumer confidence index. Could a continued improvement in consumer morale buoy the Euro.