The Pound Euro (GBP/EUR) exchange rate traded in a wide range for the majority of last week, striking a new two-week low on Wednesday ahead of the Bank of England (BoE)’s interest rate decision.
At the time of writing, the GBP/EUR exchange rate traded at around €1.1622, virtually unchanged from Friday’s opening levels.
The Pound (GBP) began the week struggling to find a clear trajectory amid a significant lack of UK economic data.
As such, Sterling sentiment was undermined by ongoing Bank of England interest rate cut bets ahead of the central bank’s upcoming decision.
On Thursday, the BoE delivered a widely anticipated hold on interest rates, keeping the bank’s base rate at 5.25% for a sixth consecutive time.
However, a more notably dovish voting spilt served to undermine Sterling sentiment following the release.
Out of 9 Monetary Policy Committee (MPC) members, 7 officials voted to keep rates unchanged whilst 2 members voted for an immediate rate cut. This served to boost June interest rate cut bets, thereby sapping Sterling’s demand.
On Friday, the Pound continued to be undermined by the BoE’s dovish tilt, as it struggled to catch bids even in the wake of some better-than-expected domestic GDP data.
The UK’s preliminary GDP data for the first quarter of the year showed the UK economy expanded by 0.6%, rising from a 0.3% contraction in 2023’s fourth quarter, and beat a more modest expectation of a 0.4% reading.
However, despite the forecast beating data and confirmation that the UK has escaped its shallow recession at the end of last year, the Pound remained rangebound against its peers.
Euro (EUR) Fluctuates amid Influx of Data
The Euro (EUR) began the week wavering against its counterparts following some mixed releases from the Eurozone’s largest economy.
An unexpected decline in German factory orders initially served to undermine the common currency as orders fell by 0.4% in March, rather than rising by 0.5% as predicted.
However, able to cushion some of EUR’s losses were Germany’s latest exports figures, with the data up by 0.9% in the export-heavy industry.
Furthermore, better-than-forecast retail sales across the Eurozone further underpinned the Euro on Tuesday as retail sales rose by 0.8% in March, surpassing market forecasts of 0.6% and jumped from February’s -0.3% reading.
Moving into Wednesday, EUR exchange rates were buoyed following some better-than-expected German industrial production data.
Germany’s latest industrial production figures reported a 0.4% contraction in March, dropping from February’s 1.7% reading, however, beat forecasts of a 0.6% decline.
Although this marked the first contraction in the sector within a three-month period, industrial production slowed less than expected in the Eurozone’s largest economy which ultimately supported EUR.
The end of the week saw minimal Eurozone data releases which in turn saw the single currency close the week trading without a clear direction.
Pound Euro (GBP/EUR) Exchange Rate Forecast: Inflow of Data to Infuse Volatility into Pairing?
Looking ahead, the primary catalyst of movement for the Pound Euro exchange rate for the first half of this week will likely be several data releases from both the UK and from within the Eurozone.
On Tuesday, the UK’s latest labour data is expected to show unemployment in the UK held at a six-month high of 4.2% in March. Furthermore, UK average earnings (excluding bonuses) are also expected to cool over the same period. Could signs of a slowing UK labour market strengthen BoE rate cut bets and in turn dent the Pound?
Turning to the Euro, on Tuesday, German inflation is forecast to marginally warm which could see EUR exchange rates begin the week on the front foot.
Also scheduled for release on Tuesday is Germany’s latest Zew economic sentiment index. As the data is also expected to rise, this could further bolster the Euro at the start of this week’s trading session.
