GBP/EUR exchange rate fluctuates despite growing services sector
The Pound Euro (GBP/EUR) exchange rate saw choppy trade at the end of last week’s session, with an upbeat services PMI supporting GBP.
Sterling initially rose against the Euro after a better-than-expected preliminary services PMI. Activity in the key sector expanded more than anticipated in January, assuaging worries about the UK’s economic health.
However, further news of struggle in the UK retail sector saw GBP soften against its peers. The Confederation of British Industry (CBI) found that consumer spending plunged to a three-year low in January.
So far this week, the GBP/EUR exchange rate has continued to trade in a wide range, amid a fluctuating market mood.
Looking to the week ahead, GBP exchange rates may see fresh volatility after the Bank of England’s (BoE) interest rate decision. While rates are expected to remain unchanged, dovish forward guidance could weigh on Sterling.
GBP/USD Exchange Rate: Pound slips as IMF downgrades economic forecasts
Trade in the Pound US Dollar (GBP/USD) exchange rate has also been erratic over the past seven days.
The end of last week saw a mixed market mood and uneven UK data infuse volatility into the pairing.
Monday saw Sterling stumble against its foes, as a continued lull in macroeconomic data releases left it vulnerable.
This was followed on Tuesday by further pressure on the Pound as UK shop price inflation cooled to its lowest level since May 2022.
The International Monetary Fund (IMF) added further headwinds, as it downgraded its economic forecasts for the UK in 2025. Furthermore, the IMF advised against tax cuts, further dampening Sterling.
With UK data thin on the ground over the coming days, GBP is likely to be driven by analysis and anticipation of the BoE’s interest rate decision.
USD/GBP Exchange Rate: US Dollar turbulent despite strong economic data
The US Dollar Pound (USD/GBP) exchange rate traded in a wide range over the last seven days, despite robust economic data.
Wednesday saw the US Dollar slip as risk-on trade affected the safe-haven currency. However, stronger-than-anticipated service PMI results cushioned USD over the session.
The upbeat mood continued to undermine the ‘Greenback’ despite an above-forecast expansion in the US economy. In the fourth quarter, US GDP printed at 3.3%, beating forecasts for a 2% expansion.
Bullish trade continued through to Friday, with a larger-than-expected cooldown in the Federal Reserve’s preferred gauge of inflation bringing additional headwinds.
On Tuesday, rising US treasury bond yields and robust employment data allowed the ‘Greenback’ to gain ground against its peers.
USD investors have been reluctant to place significant bets, as anticipation continues to build for the Fed’s latest interest rate decision. Tonight, the central bank is expected to leave rates unchanged and push against rate cut expectations, which may strengthen USD.
Looking ahead, January’s non farm payrolls data is due to print on Friday. The number of jobs created is forecast to have dropped, which may weigh on the ‘Greenback’.
EUR/USD Exchange Rate: Euro slides amid renewed ECB rate cut bets
The Euro US Dollar (EUR/USD) exchange rate weakened over the past week. The Euro began to slip on Wednesday amid downbeat PMIs for both manufacturing and service sectors.
The European Central Bank (ECB) then published its latest interest rate decision, keeping rates unchanged as expected. While ECB President Christine Lagarde aimed to push back against rate cut bets, investors remained unconvinced, causing EUR to weaken further.
While German consumer confidence deteriorated to significant lows for February, EUR managed to recover on Friday.
However, dovish commentary from ECB policymakers saw the common currency tumble on Monday as ECB policymaker Mario Centeno advocated for cutting rates sooner rather than later.
The Euro’s fortunes improved yesterday, however, following the latest Eurozone GDP data. In Q4, the bloc’s economy stagnated rather than contracting as expected, boosting EUR. Additionally, the yearly rate showed a 0.1% expansion, offering further support to the Euro.
Tomorrow, the latest Eurozone inflation data is scheduled for publication. The headline rate is forecast to have cooled to 2.8%, which may weaken EUR as inflation continues to fall.