The Pound Euro (GBP/EUR) exchange rate came under considerable selling pressure this week, mostly in response to some lacklustre UK data releases and coronavirus concerns
Pound tumbles amid disappointing data and rise in UK coronavirus cases
The Pound opened this week on stable footing, but quickly began to retreat, following the publication of the UK’s latest jobs figures.
While June’s release reported a surprise drop in unemployment and a sharper-than-expected jump in wage growth, this failed to translate into support for Sterling as analysts warned that the end of the government’s furlough scheme could send unemployment rising again.
The GBP/EUR exchange rate then attempted to rally in mid-week trade, however the UK’s consumer price index revealed inflation cooled more than expected last month.
Concerns that this could dampen the prospect of the Bank of England (BoE) tightening its monetary policy, coupled with a worrying rise in UK coronavirus cases sent the Pound plummeting through the second half of the week.
The Pound’s miserable week was then capped off by some abysmal retail sales figures, which reported a surprise contraction of sales growth in July, as the effects of Euro 2020 unwound.
Meanwhile, the Euro benefitted from some robust GDP and inflation figures at the start of the week, which left the single currency well positioned to capitalise on the Pound’s weakness through the latter half of the session.
UK and Eurozone PMI releases in the spotlight next week
Kicking off next week will be the publication of the latest PMI figures from the UK and Eurozone.
This could see the Pound extend its downside momentum into a new week as economists forecast that August’s preliminary figures will report another slowing of private sector activity.
Meanwhile, the Eurozone’s PMIs are expected to report that activity in the bloc remained fairly robust this month, potentially lending some additional support to the Euro in the process.
Elsewhere both GBP and EUR investors are likely to keep a close eye on domestic coronavirus developments amidst concerns that cases of the Delta variant are on the rise.
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