Pound-Euro could come under renewed pressure if UK growth disappoints this week, while stronger Eurozone GDP and industrial data could favour the single currency.
The Pound to Euro (GBP/EUR) exchange rate edged lower last week as UK economic data failed to provide sustained support for Sterling, while US Dollar weakness helped underpin the Euro.
At the time of writing, GBP/EUR was trading around €1.1664, down approximately 0.2% over the week.
DAILY RECAP:
The Pound (GBP) weakened against its stronger rivals at the start of the week after the UK’s final manufacturing PMI was revised lower, signalling slower activity while still marking a ninth consecutive month of expansion.
With no domestic economic data released on Tuesday, Sterling remained vulnerable to further losses against some of its peers.
Wednesday’s final services PMI provided only brief support, despite an upward revision confirming that activity across the UK’s dominant services sector returned to growth in July.
Sterling’s uneven performance continued into the latter part of the week, with an absence of notable UK economic releases leaving the currency without a strong directional catalyst.
Meanwhile, the Euro (EUR) edged higher against some of its riskier peers on Monday despite disappointing Eurozone data, as a more cautious market mood provided support.
The common currency then benefited from its inverse relationship with the US Dollar (USD) as the latter weakened.
A modest upward revision to the Eurozone’s final services PMI also provided some support for EUR on Wednesday.
However, the Euro retreated on Thursday as the US Dollar recovered and Eurozone retail sales unexpectedly contracted in June.
The single currency subsequently regained some of these losses on Friday, ending the week modestly higher against the Pound.
Near-Term GBP/EUR Forecast: Latest GDP Figures to Drive Movement
Looking ahead, the Pound to Euro exchange rate may remain relatively subdued during the first half of the week amid a lack of significant UK and Eurozone economic releases.
Attention will then turn to the UK’s preliminary second-quarter GDP figures.
Markets expect economic growth to slow from 0.6% to 0.4%. A reading broadly in line with expectations may have a limited impact on Sterling, while a sharper-than-forecast slowdown could put renewed pressure on the Pound.
Eurozone industrial production is also due on Thursday, with an expected recovery in June potentially providing support for the single currency.
Friday then brings the Eurozone’s second-quarter GDP figures. Confirmation that the bloc returned to growth could help the Euro finish the week on a stronger footing.
Our currency coverage draws on live market data, official economic releases and published bank research.
