The GBP/EUR exchange rate traded in a wide range this week in response to a dovish rate decision by the Bank of England (BoE) and some mixed industrial data from Germany.
Shock Split in BoE MPC Raises Odds of UK Rate Cut
The Pound fluctuated this week, as a mix of UK political uncertainty, upbeat data and dovish BoE all influenced GBP exchange rates.
Sterling got off to a robust start this week, rising on the back of a better-than-expected services PMI, before stabilising amidst rising political uncertainty as the UK election campaign got into full swing.
However GBP sentiment then soured on Thursday following the BoE’s latest rate decision.
While no policy changed were made this month, GBP investors were shocked to learn that two members of the Monetary Policy Committee (MPC) voted for an immediate rate cut.
Meanwhile the Euro struggled to find support through the first half of the week, weighed down by broad gains in the US Dollar.
Through the latter half of the week the focus was Germany as it released its latest Industrial data.
This lead to some fleeting gains for the Euro after German factory orders smashed expectations in September, which were quickly wiped out again after the country reported a larger than expected contraction in industrial production.
UK GDP and Political Developments in Focus Next Week
Looking ahead to next week, the Pound looks set to get off on strong footing with the preliminary release of the UK’s third quarter GDP figures.
Economists forecast growth will have rebounded at a healthy clip in Q3, climbing from -0.2% to 0.3% and resulting in the UK avoiding slipping into a recession this year.
However any upside from the GDP release may prove limited as continued political uncertainty keeps a cap on Sterling.
Meanwhile, in the Eurozone the focus looks set to remain on Germany as it publishes its own GDP figures.
These are widely expected to confirm that the country slipped into a technical recession in the third quarter and as a result are likely to weigh heavily on the Euro.
Exerting further pressure on EUR exchange rates may be the latest ZEW surveys, which are expected to show economic sentiment in the Eurozone continued to deteriorate in November.