The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week as the latest UK data infused volatility into Sterling.
What’s Been Happening: Pound Euro Fluctuates following employment and inflation releases
The Pound (GBP) opened last week on the front foot. The increasingly risk-sensitive currency was initially underpinned by market optimism. Before a broadly upbeat UK jobs report helped to reinforce the upside in Sterling.
At the same time, the Euro (EUR) struggled to attract support in the first half of the week, despite a stronger-than-expected rebound in German economic sentiment this month.
However, the Pound’s fortunes began to sour in the middle of the week. This came as a softer-than-expected UK inflation print dampened Bank of England (BoE) interest rate expectations.
In the second half of the week the euro applied further pressure to Sterling as a downbeat market mood and weaker US Dollar (USD) bolstered demand for the single currency.
GBP/EUR then slumped again on Friday, following the publication of the UK’s latest retail sales figures. As a surprise contraction in sales growth in October stoked UK recession fears.
Three Things to Watch Out for This Week
- UK Autumn Statement
Chancellor Jeremy Hunt is set to unveil his Autumn Statement on Wednesday. Will a positive reaction to his tax and spending plans garner some support for the Pound?
- UK PMIs
Also set to drive GBP exchange rates this week is the UK’s latest PMIs. Another contraction in private sector growth is likely to stoke UK recession fears and drag Sterling lower.
- Eurozone PMIs
The publication of the Eurozone’s own PMIs may act as an even greater headwind for the Euro. As the indexes are expected to show the bloc’s manufacturing and services sectors remain deep in contraction territory.
Pound Euro Forecast
Elsewhere there’s the potential for the Pound Euro exchange rate to be influenced by central bank speculation. As both BoE Governor Andrew Bailey and European Central Bank (ECB) President Christine Lagarde are scheduled to speak this week.