The Pound to Euro (GBP/EUR) exchange rate was catapulted to a two-month high this week, thanks to some positive indicators from the UK.
Pound Buoyed by Brexit Optimism and Upbeat Data
The Pound rocketed higher this week, soaring against the Euro and most of its other peers amidst some positive data and cautious Brexit optimism.
In regards to Brexit, GBP investors welcomed some optimism from Number 10, with Downing Street suggesting a post-Brexit trade deal with the EU could be reached next month.
While some concerns over the UK’s ability to sustain a surge in inflation in July provoked some weakness in GBP/EUR in the mid-week, Sterling soaring through the latter half of the week on some positive data releases.
These included a better-than-expected retail sales print in July and the UK’s strongest PMI release in over six years.
The Euro, meanwhile, struggled to hold its ground this week, amid growing concerns Europe is facing a second wave of coronavirus infections, stoking fears lockdown measures could be re-introduced in some regions.
EUR exchange rates were also pressure by the latest minutes from the European Central Bank (ECB), as they revealed some ECB policymakers are reluctant to top up the bank’s stimulus programme, despite expectations it will be exhausted before the end of 2020.
The Euro then faced one final setback with the publication of the Eurozone’s own PMI figures on Friday, as they pointed to the bloc’s recovery stalling in August amidst the resurgence in coronavirus cases.
Eurozone’s Coronavirus Resurgence to Continue to Drag on the Euro?
Looking ahead to next week, the GBP/EUR exchange rate may extend its rally through the trading session, if concerns over Europe’s coronavirus resurgence continue to take their toll on the Euro.
On the data front, the publication of Germany’s latest GDP figures will be in the spotlight. Could some of Germany’s recent upbeat data see second quarter growth revised a little higher?
Also in focus for EUR investors will be the Eurozone’s latest economic sentiment index, with another improvement in sentiment potentially lending some support to the single currency.
Meanwhile, in the absence of any notable economic releases, the Pound may find itself directionless through much of next week’s session.
This is likely to see GBP investors look to scheduled remarks from Bank of England (BoE) governor Andrew Bailey for fresh impetus as the end of the session. Potentially leading to some weakness in Sterling should Bailey touch on the possibility of negative interest rates.
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