GBP/EUR News – Pound weakens as UK private sector suffers first contraction in three years

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Amid another volatile session of trade, the GBP/EUR exchange rate struck a five-month low after some poor PMI figures lent support to suggestions that the UK economy may have contracted in the second quarter.

Pound Rocked By Gloomy PMI Figures

The Pound to Euro exchange rate was volatile at the start of this week, as a run of poor UK PMI readings coincided with threats that the US could impose tariffs on the EU.

Adding to this early volatility was come political uncertainty at the top of the EU, as leaders struggled to decide on who to nominate for a number of top posts within the EU which will be open later this year.

The UK PMI readings proved to be the most negative factor impacting GBP/EUR this week however, with the pairing touching a five-month low on Wednesday as the UK’s private sector was shown to have contracted for the first time in three years last month.

The latter half of the week then saw the GBP/EUR exchange rate mostly subdued, with the Euro suppressed by some weaker than expected retail sales figures, whilst the heightened political uncertainty in the UK, limited the appeal of the Pound.

Closing out the session was the publication of Germany’s factory orders figures, where a dramatic contraction continued to drag on the single currency, but not enough to spur any notable swings in the GBP/EUR exchange rate.

Slide in GDP to Sink the Pound?

Looking ahead to next week’s session, the release of the UK’s monthly GDP figures look likely to push the Pound lower.

Following on from a sizable 0.4% decline in growth in April, economists are forecasting another contraction in May, likely making it all but inevitable that the UK economy will have slumped in the second quarter and likely sinking Sterling sentiment.

On top of this there will be the ongoing uncertainty surrounding the Tory leadership race, which is likely to continue to limit any upside in GBP exchange rates.

Meanwhile, the focus for EUR investors next week will be on Germany’s latest industrial production figures, with the Euro likely to retreat at the start of the session as another suspected slump in factory orders in May will stoke fears of a slowdown in the Eurozone’s largest economy.

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