Amid a volatile session of trade, the GBP/EUR exchange rate fell back this week as the continued uncertainty hanging over UK politics resulted in markets remaining bearish towards the Pound.
Pound Undermined by Heightened Political Uncertainty
The Pound to Euro exchange rate traded in a wide range throughout this week’s session as political uncertainty in the UK and a sense of gloom in the Eurozone prompted some notable volatility in the pairing.
For EUR investors some dovish chatter from European Central Bank officials and another fall in German business sentiment sought to trim demand for the Euro throughout the session.
However ultimately proving a greater hindrance for Pound was the rising political uncertainty in the UK, where a row involving the police appeared to suggest that Boris Johnson’s accent to Prime Minister may not be quite as inevitable as initially suspected.
Closing out the week was the publication of the Eurozone’s latest CPI figures, which consolidated the losses in GBP/EUR as it propelled the Euro to a new five-month high on the bank of a stronger-than-expected rebound in underlying inflation which was seen as lifting some of the pressure off of the ECB to lower rates this year.
UK PMI Figures to Offer Support to the Pound?
Looking ahead to next week’s session, the Pound may be able to reverse some of its recent losses thanks to the publication of the UK’s latest PMI figures.
Current forecasts suggest that growth in the UK’s private sector will have bounced back in June, following a contraction in both the manufacturing and construction sectors in May, likely strengthening Sterling as this may help prevent domestic growth from stagnating in the second quarter.
Meanwhile, the focus for EUR investors will be on a slew of German economic data scheduled for publication next week.
This will kick off with the release of Germany’s jobs report on Monday, where a potential drop in unemployment may bolster the Euro.
However likely commanding more attention will be the publication of Germany’s latest industrial data on Friday, with a contraction in factory orders or industrial production likely to stoke concerns that the Eurozone’s largest economy may be in danger of contracting in the second quarter.
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