The GBP/EUR exchange rate traded in a wide range over the past week, in response to vaccination optimism and the UK’s latest GDP figures.
Pound met by volatility as focus on vaccinations, GDP
Despite a shaky start, the Pound moved broadly higher against the Euro through the first half of this week’s session as strong results from the UK’s vaccination programme continued to buoy Sterling sentiment.
But the Pound then faltered at the start of the second half of the week as Bank of England Governor (BoE) Andrew Bailey warned the UK is at risk of being cut off from access to the EU’s financial markets.
Closing out the week was the publication of the UK’s latest GDP figures, which reported that the UK economy expanded by a better-than-expected 1% in the last quarter of 2020, and as such is likely to avoid a double-dip recession.
However, the release also revealed the UK suffered a record slump in annualised growth in 2020, limiting any potential upside in Sterling on Friday.
Meanwhile, in the absence of any major Eurozone data releases this week, movement in the Euro has been mostly defined by the single currency’s relationship with the US Dollar.
The negative correlation between the pairing has offered some steady support to the Euro through this week’s session, as the US Dollar fell victim to falling US Treasury yields and risk-on sentiment.
However, capping this upside in the Euro were ongoing concerns over the EU’s vaccination debacle, as the continent continued to lag well behind the US and UK’s efforts.
UK and Eurozone PMIs in the spotlight
Looking ahead, the publication of the UK and Eurozone’s latest PMI figures looks to be the highlight of next week’s data calendar.
Economists forecast the Eurozone’s PMI will show the bloc’s private sector continued to contract this month, abet at a slightly slower pace than in January which may potentially lend some support to the Euro.
Meanwhile, the UK’s preliminary figures are also likely to report another sizable slump in economic activity in February, with the Pound set for another setback if the services index continued to hover around 40.
Also likely to influence GBP exchange rates next week will be the publication of the UK’s consumer price index. Will inflation have continued to accelerated in January, or will the national lockdown have stifled price growth, potentially undermining Sterling in the process?