The Pound Euro (GBP/EUR) exchange rate traded in a wide range this week, amidst mounting concerns over the UK’s economic recovery
Pound rocked by mounting economic concerns
The Pound got off to a strong start this week, with the GBP/EUR exchange rate bouncing back from a one-month low amidst an improving market mood.
However, Sterling momentum quickly began to fade amidst growing concerns that the UK’s economic recovery could be disrupted by some underlying issues.
The two main concerns where over labour shortages in some consumer facing sectors as well as widespread supply chain problems, which prompted some firms to issue a warning over the key Christmas trading period.
Meanwhile, the Euro initially faltered this week, pressured by some weaker-than-expected PMI releases as well as a report from Germany’s Bundesbank, which warned German economic growth could miss forecasts this year due to the Delta variant of the coronavirus.
But the single currency quickly began to find its feet again after German GDP was revised slightly higher in the second quarter.
The Euro was then able to take advantage of a pullback in the Pound in the latter half of the week, in spite of the minutes from the European Central Bank’s (ECB) latest policy meeting reaffirming the bank’s current dovish bias.
Eurozone inflation in the spotlight
Turning to next week’s session the most notable data release will be the Eurozone’s consumer price index.
August’s preliminary release is expected to report that inflation in the bloc accelerated sharply to 2.7%.
While this may reflect well on EUR exchange rates in the first half of the week, with the ECB so reluctant to start tightening its monetary policy the upside potential of the Euro may prove limited.
EUR investors will also be keeping an eye out for the Eurozone’s latest retail sales figures, with the Euro potentially facing some headwinds at the end of the week, amidst forecasts sales growth will have stalled in July.
Meanwhile, in the absence of any notable UK data releases, the pound could be left vulnerable through next week’s trading session, particularly if domestic coronavirus cases continue to rise at a worrying pace.