The Pound Euro (GBP/EUR) exchange rate ticked higher last week, allowing the pairing to rebound from a four-month low.
What’s Been Happening: Pound Euro Firms amid Improving Market Mood
The Euro (EUR) got off to a poor start last week. Demand for the single currency being knocked by another deterioration in German business morale.
However, the Pound (GBP) also faced resistance in the first half the week. As accountancy giant KPMG and ratings agency S&P Global Ratings warned the UK economy could be at risk of slipping into a recession.
GBP/EUR then surged midweek. The Euro came under renewed pressured because of a fall in German consumer confidence as well as a strengthening US Dollar (USD).
The pairing struck a one-week high before quickly retreating again as a pullback in USD offered some relief to the single currency
Trade in the Pound Euro exchange rate was then choppy in the latter half of the week. A weaker-than-expected Eurozone inflation print further undermined European Central Bank (ECB) interest rate expectations and dragged on the Euro.
At the same time, GBP investors shrugged off an upwards revision to UK first quarter GDP, amid an end-of-quarter market correction.
Three Things to Watch Out for This Week
- German Factory Orders
Germany’s factor sector is a key engine of growth in the Eurozone’s largest economy. A rebound in factory orders in August could therefore offer some support to the Euro later this week.
- ECB President Lagarde Speech
The Euro may also be influenced by a speech from ECB President Christine Lagarde. If Lagarde strikes a dovish tone, EUR exchange rates may weaken.
- UK Services PMI
The UK’s services PMI will be the only GBP data of any note this week. Barring an upwards revision to September’s finalised figures, they may reinforce the gloomy outlook for the UK economy and drag on the Pound.
Pound Euro Forecast
With data thin on the ground this week, the Pound Euro exchange rate is also likely to be influenced by external factors. A cautious mood could see GBP/EUR trend lower.