GBP/EUR exchange rate met by volatility in data heavy week

The Pound Euro (GBP/EUR) exchange rate traded in a wide range this week, after Sterling failed to sustain its initial rally, despite a slew of upbeat data releases. 

Pound fails to sustain gains in spite of positive data burst 

The Pound initially got off to a strong start this week, with the GBP/EUR exchange rate climbing back above €1.16 as Sterling rode a wave of optimism which swept through markets on Monday. 

However, the Pound was unable to sustain these gains for long, with a souring of market sentiment almost immediately triggering some profit taking, in spite of data showing domestic unemployment unexpectedly fell to a three-month low of 4.9% in February. 

The downtrend then persisted in mid-week trade, as the UK inflation printed below expectations in March ,and health experts warned of the UK potentially facing a third wave of coronavirus infections later this year. 

Sterling sentiment was a little more positive at the end of the week however, as the latest UK retail sales and PMI figures came in above forecast. 

The euro, meanwhile, was began to claw back its initial losses against the Pound in the first half of the week, amidst Europe’s continued acceleration of its vaccine rollout. 

The EUR/GBP exchange rate then appreciated sharply on Thursday as the European Central Bank (ECB) concluded its latest policy meeting, following which, it struck a cautiously optimistic tone in its outlook for the rest of 2021. 

The euro then received another boost at the very end of the session as the latest Eurozone PMI’s beat expectations. 

Eurozone GDP to weigh on the euro? 

Looking ahead, to next week’s session, the main catalyst in the Pound Euro exchange rate will no doubt be the publication of the Eurozone’s latest GDP release. 

The preliminary figures are expected to report the bloc suffered another contraction of economic growth in the first quarter of 2021, likely putting considerable pressure on the Euro, as this would confirm the Eurozone slipped into a double dip recession over the winter. 

Also influencing EUR exchange rates will be the publication of the Eurozone’s consumer price index. Will another bump in inflation this month help to minimise any pullback in the single currency? 

Meanwhile, in the absence of any notable UK data releases next week, GBP investors may look to domestic coronavirus developments for fresh impetus. 

Should local cases continue to fall and the government continue to express confidence that it will press ahead with its next stage of easing, we might see the Pound strengthen. 

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