The Pound to Euro (GBP/EUR) exchange rate fell back this week, undermined by some disappointing data releases from the UK.
Pound Sinks as UK Data Fails to Inspire Confidence
The Pound fell sharply against the Euro this week as some underwhelming economic data and lingering Brexit concerns weighed on Sterling sentiment.
This saw the GBP/EUR exchange rate nosedive through the first half of the week as GBP investors were left disappointed by the UK’s latest GDP figures, which revealed a slower-than-expected rebound in growth in May.
While the Pound was able to recoup some ground in the mid-week on the back of some upbeat inflation figures, this upside was ultimately capped by a mixed jobs report on Thursday.
Adding to the pressure on Sterling sentiment throughout the week were also ongoing concerns over Brexit, as the UK and EU remained deadlocked over the terms of a post-Brexit trade deal.
The Euro, meanwhile, enjoyed an explosive start to the session this week, as a report from Germany’s government claiming the country had ‘passed its lowest point’ was cheered by investors.
The single currency then consolidated these gains through the second part of the week as the European Central Bank (ECB) concluded its latest policy meeting by keeping its monetary policy untouched, ahead of a critical EU summit focusing on the EU’s coronavirus recovery fund.
Positive EU Summit to Kick Start Euro’s Gains Next Week?
Looking ahead to next week, the focus at the start of the session will undoubtedly be on the result of the EU summit.
Should EU leaders have been able to win over the so-called ‘frugal four’ – Austria, the Netherlands, Denmark and Sweden- and make progress on some of the most contentious issues of the EU’s fund then we expect to see the Euro to strengthen in early trade.
Also in focus for EUR investors will be the Eurozone’s latest PMI figures, with the single currency poised to strengthen if the private sector returned to growth this month.
The release of the UK’s own preliminary PMIs will also be in the spotlight for GBP investors and may help to buoy the Pound if the indexes return to expansion territory in July.
However, any upside in Sterling is likely to remain capped so long as Brexit uncertainty continues to permeate, with analysts still pessimistic on the chances for a breakthrough this month.
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