The Pound Euro (GBP/EUR) exchange rate traded erratically last week as a mixed market mood infused volatility into the pairing.
What’s Been Happening: Pound Euro Fluctuates in Mixed Trade
The Euro (EUR) got off to a poor start last week. The single currency stumbled on Monday as a larger-than-expected contraction in industrial production, stoked German recession fears.
Meanwhile the Pound (GBP) was initially supported by risk-on flows. Before Sterling demand was tempered on Tuesday after the International Monetary Fund (IMF) warned the UK is set to be the slowest-growing G7 economy in 2024.
GBP/EUR struck its best levels on Wednesday. The Euro faced resistance as data confirmed German inflation slowed to a 19-month low in September. While the Pound continued to be underpinned by an upbeat market mood.
However, the Pound Euro exchange rate then plummeted on Thursday with the publication of the UK’s latest GDP figures. While August’s figures showed the UK economy expanded by 0.2% as expected, it was not enough to ease recession fears.
GBP/EUR then extended these losses on Friday, with the pairing ultimately closing the session lower. The Pound was undermined by a souring market mood, at the same time that the Euro was supported by hawkish comments from a European Central Bank (ECB) policymaker.
Three Things to Watch Out for This Week
- UK Inflation
Centre stage this week will be the publication of the UK’s consumer price index. September’s CPI figures are expected to report UK inflation continued to decelerate. This may weaken BoE rate hike bets and pull the Pound lower on Wednesday.
- UK Jobs Report
In the meantime, Sterling could find support with the publication of the UK’s latest jobs report. Will another robust wage growth print bolster GBP exchange rates?
- German ZEW Index
Germany’s latest ZEW economic sentiment index will be the primary focus for EUR investors this week. Morale in the Eurozone’s latest economy is expected to have improved this month, potentially buoying the Euro.
Pound Euro Forecast
Several high-impact data releases and heightened geopolitical uncertainty could inject further volatility into the Pound Euro exchange rate this week.