The Pound reeled last week in the face of some abysmal UK PMI figures, leading GBP/EUR to drop from €1.14 to €1.13 before rebounding after the BoE’s latest policy meeting.
Pound Rallies as Carney Rules out Rate Cut
The Pound initially slumped against the Euro last week, with the GBP/EUR exchange rate being driven lower by the UK’s latest PMI figures as Britain’s private sector came dangerously close to stagnating in January.
However Sterling was able to rebound in the second half of the week as the Bank of England (BoE) concluded its first policy meeting of 2019.
While the bank didn’t deliver any policy changes this month, the Pound was able to soar on Thursday as GBP investors seized on comments made by Mark Carney, in which the BoE governor appeared to rule out the chances of a rate cut this year.
Meanwhile the Euro struggled to capitalise on the Pound weakness during last week’s session as it faced its own hurdles.
These came in the form of some lacklustre German industrial data (which stoked recession fears in Europe’s largest economy) as well as the European Commission’s latest economic forecasts, which saw the EC slash its 2019 growth forecasts for the Eurozone from 1.9% to just 1.3%.
Robust Q4 GDP to Offer Support to Sterling?
Outside of some possible Brexit curveballs, the main catalyst for movement in the GBP/EUR exchange rate at the start of this week will likely be the release of the UK’s latest GDP figures,
Economists forecast that growth will have held at 0.6% in the fourth quarter of 2018, potentially strengthening the Pound through the first half of the week.
This will be followed by the publication of the UK’s CPI figures on Wednesday, with Sterling likely finding further support if inflation held within the BoE’s 2% target range in January.
Meanwhile the focus for EUR investors this week will be on the release of Germany’s own GDP figures.
Thursday’s data will finally confirm whether or not Germany managed to avoid a technical recession at the end of 2018, with the Euro expected to tumble if growth the Eurozone’s largest economy failed to bounce back in the fourth quarter.