Pound-Euro could struggle to extend gains if German business sentiment improves, while a quiet UK calendar leaves Sterling without a strong domestic catalyst.
The Pound to Euro (GBP/EUR) exchange rate crept higher through the start of this week’s session amid reports that UK productivity may be stronger than official figures would suggest.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1680. Up almost 0.2% from the start of Monday’s session.
DAILY RECAP:
The Pound (GBP) traded with modest support on Monday as a report suggested that UK productivity may be stronger than thought.
Analysis from the Resolution Foundation thinktank claims that the lull in productivity seen after the 2008 financial crisis has turned around in recent years.
While official figures in the Labour Force Survey suggest that productivity remains in the doldrums, the Resolution Foundation’s own productivity measure disputes this.
If correct, this suggests the UK could be on a path to more resilient economic growth and improvement in living standards.
The Euro (EUR) stumbled on Monday as the US Dollar (USD) clawed back some ground ahead of the expected announcement of fresh US sanctions against Iran.
Investors were awaiting details of the sanctions package, with US Treasury Secretary Scott Bessent expected to outline the measures later in the day. Washington has indicated that the new restrictions could represent a significant escalation of economic pressure on Iran, while Tehran has warned that further sanctions could provoke a response targeting oil exports from the Gulf
This injected a degree of caution into markets at the start of the week, boosting demand for the safe-haven ‘Greenback’ at the expense of the single currency.
Near-Term GBP/EUR Forecast: Uptick in German Business Sentiment to Lift the Euro?
Looking ahead, the next catalyst of movement for the Pound Euro exchange rate will be the publication of Germany’s latest IFO business climate index.
If August’s survey reports business morale continues to improve, it could see the single currency catch bids.
Also on the docket on Tuesday will be Germany’s latest GDP reading, but barring a revision to second quarter growth, its impact on the Euro may be minimal.
Meanwhile, UK economic data is in short supply through the first half of this week, which may leave the Pound to trade without strong directional bias on Tuesday.
Our currency coverage draws on live market data, official economic releases and published bank research.
