The GBP/EUR exchange rate continued to beat a hasty retreat this week, slumping to a fresh two-week low on the back of growing Brexit jitters and some worrying UK GDP figures.
Pound Battered by Brexit and GDP Concerns
The Pound found itself on the defensive against the Euro this week, falling heavily again through the first half of the session due to a mixture of Brexit uncertainty and EUR strength.
GBP investors grew increasingly concerned about the risks of a no-deal Brexit this week, following reports suggesting that in an event of a no-confidence vote, Boris Johnson would seek to delay a general election until after the Brexit deadline.
At the same time, the Euro enjoyed some notable support throughout the start of the session as rising US-China trade tensions and a subsequent slump in the US Dollar helped to fuel demand for the single currency.
However somewhat tempering EUR exchange rates in the latter half of the week were renewed concerns over Italian politics, amidst signs the country’s coalition government was close to collapse.
Closing out the week was the publication of the UK’s latest GDP figures, which sent the Pound into retreat once more after the UK economy was shown to have contracted by 0.2% in the second quarter.
Will a Slump in UK Wage Growth Drive Sterling Even Lower?
Looking ahead to next week, we may see the downtrend in the Pound to Euro exchange rate persist through the first half of the week.
While political headlines are likely to continue to be contributing factor in this, the main catalyst may be the UK’s latest employment report.
Economists forecast the data will show that domestic wage growth slowed in June, weakening consumer spending power and likely putting more pressure on the economy.
This will be followed by the UK’s latest CPI figures on Wednesday which could also drag on Sterling sentiment if inflation stalled again last month as expected.
Meanwhile, in the spotlight for EUR investors next week will be the publication of Germany’s GDP figures.
This is likely to see the Euro slump on Wednesday as economists forecast that Germany’s economy will also have contracted in the second quarter.