The Pound Euro (GBP/EUR) exchange rate seesawed last week, as both currencies were undermined by poor economic data.
What’s Been Happening: Pound Drops as Private Sector Deteriorates
Last week, the Pound (GBP) began the session on a quiet note, due to a lack of macroeconomic data releases.
However, dismal releases from the UK’s October flash PMIs weighed heavily on Sterling, leading to sharp losses on Tuesday.
The vital UK service sector contracted further, which prompted renewed recession concerns amongst investors. Furthermore, UK joblessness increased, bringing additional headwinds.
This was compounded further by bleak retail sales data from the Confederation of British Industry (CBI) on Thursday.
Sterling went on to trade in a muted capacity during Friday’s session, amid a lack of wider data releases.
Meanwhile, the Euro (EUR) traded flatly at the beginning of the week, as investors looked ahead to the European Central Bank’s (ECB) interest rate decision.
EUR exchange rates weakened sharply on Tuesday as October’s PMIs showed further economic deterioration. Both the services and manufacturing sectors slipped further, reinforcing expectations of a policy pause from the ECB.
The ECB halted its tightening cycle as expected on Thursday. In the following press conference, ECB President Christine Lagarde said the economic outlook remains weak and that she expects inflation to continue cooling. This tempered EUR through to the end of the week by suggesting rates had peaked.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
The Bank of England (BoE) is expected to keep rates unchanged on Thursday, which may weaken Sterling.
- Eurozone Inflation
Inflation is forecast to have cooled further across the bloc in October, which could send EUR downward on Tuesday.
- Eurozone GDP
Analysts have recently adjusted their expectations for the Eurozone’s third-quarter GDP growth rate. Rather than contracting by 0.3%, the bloc’s economy is set to have stalled. Any surprises could spark notable movement.
Pound Euro Forecast
The GBP/EUR exchange rate could see renewed volatility over the week’s session, amid so many high-impact events. In addition to the above, the latest Eurozone employment data and final PMIs could drive movement.