The Pound Euro (GBP/EUR) exchange rate stumbled through last week, mostly in response to some dovish comments from a Bank of England (BoE) policymaker.
What’s Been Happening: Pound Euro Slides as BoE Rate Hike Bets Wane
The Pound (GBP) initially firmed last week by speculation the BoE might be considering another interest rate hike. While the Euro (EUR) was supported by stronger-than-expected German factory orders.
Sterling then started to face some resistance on Tuesday as BoE Chief Economist Huw Pill suggested the BoE will begin to cut interest rates by the end of 2024.
Midweek, GBP/EUR traded sideways. The Euro struggled in the face of weaker-than-expected Eurozone retail sales data. While souring market sentiment weighed on the increasingly risk-sensitive Pound.
The GBP selling bias was then reinforced in the second half of the week in response to additional comments from Pill. Pill suggested the BoE wouldn’t need to raise interest rates again in order to bear down on inflation.
Closing out the week was the publication of the UK’s latest GDP figures. Despite printing above expectations, a stalling of UK third quarter growth still dragged GBP/EUR to a new six-month low.
Three Things to Watch Out for This Week
- UK Inflation
The UK’s latest consumer price index will be centre stage this week. October’s CPI figures are expected to report a sharp drop in inflation. Potentially weaking the Pound as it further undermines BoE rate hike bets.
- UK Jobs Report
Also in focus for GBP investors will be the UK’s latest jobs report. Any further signs that the UK jobs market is slowing could also sap Sterling sentiment.
- German Economic Sentiment
Germany’s latest ZEW economic sentiment index is likely to act as the main catalyst of movement for the Euro this week. November’s index could boost the Euro as sentiment in the Eurozone’s largest economy is forecast to turn positive for the first time since April.
Pound Euro Forecast
In addition to some high-impact data releases, it’s likely that market sentiment will also continue to influence the Pound Euro exchange rate this week. Will a souring mood place more pressure on GBP/EUR?