The Pound-Euro could edge lower if UK PMIs soften, while steady Eurozone activity may offer the Euro some support.
The Pound to Euro (GBP/EUR) exchange rate was rangebound at the start of this week as markets digested the ‘disastrous’ results from Germany’s latest local elections.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1657. Virtually unchanged from the start of Monday’s session.
Pound to Euro (GBP/EUR): 1.166053 (-0.01%)
Euro to Dollar (EUR/USD): 1.147251 (-0.12%)
DAILY RECAP:
The Euro (EUR) was subdued on Monday as the latest regional elections in Germany raised fresh questions over Chancellor Friedrich Merz’s political standing and the outlook for economic reforms in the Eurozone’s largest economy.
Merz himself described the ruling CDU’s losses in both Berlin and Mecklenburg-Western Pomerania as a disaster but vowed to remain in his role as Chancellor.
However, EUR investors aren’t so optimistic about Merz’s chances for survival, amid rampant speculation that he could be swapped out in the middle of his term.
This, in turn, is casting doubts about Berlin’s ability to push through the reforms intended to revive Germany’s sluggish economy
The Pound (GBP) was broadly flat on Monday, as a lack of major UK economic releases left Sterling without a clear domestic catalyst.
With the Bank of England’s (BoE) latest interest rate decision also in the rearview mirror, there was also limited policy speculation to offer direction.
Some GBP investors also appeared to err on the side of caution, ahead of Prime Minister Andy Burnham’s first face-to-face meeting with US President Donald Trump, amid concerns that Burnham’s previous criticism of Trump could be an issue.
Near-Term GBP/EUR Forecast: UK and Eurozone PMIs in the Spotlight
Looking ahead, the next major catalyst of movement for the Pound Euro exchange rate will be the publication of the latest UK and Eurozone PMIs on Wednesday.
Up first will be the Eurozone releases, with September’s preliminary indexes potentially lifting the euro, as they are expected to report the bloc’s private sector continued to expand at a steady clip at the end of the third quarter.
In contrast, Sterling could come under pressure in mid-week trade as the UK’s PMIs are forecast to report a moderation in private sector activity this month.
Our currency coverage draws on live market data, official economic releases and published bank research.
