The Pound Euro (GBP/EUR) exchange rate slid to a five-month low last week, on the back of some disappointing UK data.
What’s Been Happening: Pound Euro Slumps on Weak UK Economic Releases
The Pound (GBP) initially opened last week on the front foot, as it was underpinned by hawkish comments from Bank of England (BoE) Chief Economist Huw Pill.
However, Sterling quickly retreated after the UK’s latest jobs report stoked fears the UK labour market is slowing.
The Euro (EUR), meanwhile, was well positioned to take advantage of the Pound’s weakness, as German economic sentiment saw a much sharper-than-expected improvement this month.
The GBP/EUR selloff saw a brief pause on Wednesday after the UK’s consumer price index reported domestic inflation was hotter-than-expected last month.
Sterling then came under renewed pressure in the second half of the week. Heightened geopolitical tensions saw investors shy away from the increasingly risk-sensitive Pound in favour of the safe-haven Euro.
Closing out the week was an abysmal retail sales print from the UK, which pilled even more pressure on GBP/EUR.
Three Things to Watch Out for This Week
- ECB Interest Rate Decision
The spotlight this week will be on the European Central Bank’s (ECB) latest interest rate decision. The bank is expected to leave rates on hold this month. But will a more hawkish outlook in the face of a inflationary pressures help to bolster EUR exchange rates?
- Eurozone PMIs
Ahead of the ECB’s rate decision, Tuesday will see the publication of the Eurozone’s latest PMIs. These are expected to report the bloc’s private sector continued to contract this month, potentially placing pressure on the Euro in the first half of the week.
- UK PMIs
The UK’s own PMIs will be the focus for GBP investors this week. The UK’s private sector is also expected to report another decline in growth. But could a narrower contraction allow the Pound to advance against the Euro?
Pound Euro Forecast
Elsewhere the Pound Euro exchange rate may also be influenced by events in the Middle East. As heightened geopolitical tensions could sap Sterling sentiment.