The Pound is currently trading slightly up against the Euro today, hitting a rate of €1.1332, breaking a run of losses which has seen the UK currency fall sharply over the last week. GBP/EUR opened the week at €1.1438 but has since fallen by over a cent, despite a mid-week rally that was swiftly reversed.
Political Anxiety Trumps Positive Data to Drag Pound Down
The blame for Sterling’s weakness can be squarely pinned on Brexit and the associated political turmoil, which saw Theresa May make an abortive attempt to resurrect her EU Withdrawal Bill, only to retract it again when it became clear it would fail in Parliament. May then offered her resignation on Friday, promising to leave office on June 7.
The political turmoil overshadowed the week’s data releases, which saw UK retail sales rise 5.2% year-on-year, while Wednesday’s inflation data showed that the UK CPI rose to 2.1%, putting it squarely in the Bank of England’s target zone.
On the Eurozone side of the pairing, consumer confidence data on Tuesday revealed a slight improvement, although the figure was still negative, while Thursday’s Markit composite PMI disappointed investors and the manufacturing PMI continued to reveal a state of contraction.
ECB chief Mario Draghi gave a speech mid-week, which was interpreted as somewhat hawkish by Euro investors, even though the main focus was on risk-sharing rather than monetary policy.
GBP/EUR Exchange Rate Outlook: Politics to Remain in the Spotlight as EU Election Votes Counted
At the start of next week we will learn the outcome of the EU parliamentary elections, with markets on tenterhooks to learn the full impact of the expected upsurge in populist sentiment across Europe and what it could mean for the stability of the Eurozone.
In the UK, the ongoing controversy surrounding Theresa May and her departure will continue to drive Sterling in what will be a very light week for economic data releases.
On the other hand there will be plenty of individual Eurozone country data, including consumer inflation figures for Germany, which could drive GBP/EUR higher if they disappoint, as is currently expected.