The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week. Initially sliding to a two-week low before ending the week higher.
What’s Been Happening: Pound Euro Rebounds on Dovish ECB Expectations
The Pound (GBP) got off to a slow start last week as a UK bank holiday and limited data created thin trading conditions.
The Euro (EUR) on the other hand was able to strengthen in the first half of the week. EUR ignored a drop in German consumer confidence thanks to its negative correlation with the US Dollar (USD).
GBP/EUR then rebounded from a two-week low in mid-week trade. The increasingly risk sensitive Pound benefitted from an improving market mood and Bank of England (BoE) interest rate expectations.
The Euro, meanwhile, began to face resistance amid a recovery in the US Dollar. These losses were then extended by waning European Central Bank (ECB) rate hike bets.
This followed comments by ECB policymaker Isabel Schnabel. While one of the more hawkish members of the ECB, Schnabel was noncommittal regarding further rate hikes.
The Euro remained offered, despite stronger-than-expected Eurozone inflation. As the minutes from the ECB’s July meeting expressed concern over the resilience of the Eurozone economy.
Three Things to Watch Out for This Week
- ECB Lagarde Speech
EUR investors will be focused on a speech by ECB President Lagarde at the start of this week. If she strikes a similarly dovish tone to Schnabel, the Euro could sink.
- German Industrial Data
Also in the spotlight will be the latest industrial releases from Germany. Will an expected decline in factory orders and industrial production at the start of the third quarter weigh on the single currency in the second half of the week?
- UK Services PMI
The only UK data of note will be the publication of Augusts finalised services PMI. An upwards revision to service sector growth may help to boost the Pound.
Pound Euro Forecast
There are a number of other Eurozone data releases which may influence the Pound Euro exchange rate this week. Could underwhelming PPI and retail sales figures pile more pressure on the Euro?