The GBP/EUR exchange rate fell heavily last week, with the pairing completely erasing the previous session’s gains as political uncertainty in the UK unnerved many investors.
UK Political Uncertainty Drives GBP/EUR Lower
After breaking through to €1.17 at the start of May, the Pound to Euro exchange rate was met by a stunning fall from grace this week as political uncertainty in the UK drove the pairing back to €1.15.
The slide in Sterling sentiment was mostly centred around a continued lack of progress in cross-party Brexit talks as well as speculation over the future of Theresa May’s premiership.
The publication of some strong GDP figures in the tail end of the week also failed to inspire the Pound as analysts warned that the bump in headline growth in the first quarter was driven by Brexit stockpiling, masking some underlying weakness in the UK economy.
Meanwhile, the Euro initial gains this week were tempered somewhat as the European Commission halved its growth forecast for Germany this year, while slashing Italy’s forecast to just 0.1%
However the Euro was given a leg up in the mid-week by the release of Germany’s latest industrial data as factory production in the Eurozone’s largest economy unexpectedly rose again in March, stroking hopes that Germany’s economy will have still performed well at the start of the year.
Will another Bump in Wage Growth Boost Sterling?
Coming up in next week’s session we have the publication of the UK’s latest employment figures.
This could help lend some support to the Pound through the first half of the week, if the data shows that the recent uptrend in wage growth continued into March.
Meanwhile, EUR investors will have a slew of data to sink their teeth into next week, starting with the Eurozone’s latest industrial production figures on Tuesday, with the Euro potentially coming under pressure if factory output in the bloc stagnated as expected in March.
However it will be the publication of Germany’s GDP figures in the mid-week that is likely to elicit the greatest response in the Euro, with the single currency likely to jump if Germany’s economy returned to growth in the first quarter of 2019 after stagnating at the end of last year.