The Pound Euro (GBP/EUR) exchange rate traded in a wide range this week, as Sterling’s attempts to advance on the back of some upbeat UK data proved to be short-lived.
Pound unable to take advantage of robust data
The Pound made multiple attempts to advance this week, in response to some upbeat UK data releases, starting with a jobs report which revealed domestic unemployment fell to a 10-month low in July.
This was followed by a stronger-than-expected consumer price index showing that domestic inflation soared to a nine-year high.
However, both times the Pound was unable to sustain these gains for much more than a few hours, as Sterling sentiment was quickly sapped by uncertainty over Boris Johnson’s cabinet reshuffle as well as an emerging energy crisis in the UK.
Meanwhile, the euro was infused with some volatility over the past week as a result of growing uncertainty in Germany ahead of an impending General election which will see Angela Merkle step down as Chancellor for the first time in 16 years.
The GBP/EUR then briefly touched a new one-month high in the latter half of the week. After a sharp uptick in the US Dollar weighed heavily on the Euro, as a result of the strong negative correlation between the world’s most traded currency pairing.
BoE rate decision in the spotlight next week
Looking ahead to next week’s session, is seems safe to assume that the main catalyst of movement in the GBP/EUR exchange will be the Bank of England’s (BoE) latest interest rate decision.
While no policy changes are expected from the BoE this month, GBP investors will be keeping a close eye on the bank’s policy statement for any hints that it might be prepared to start tapering its stimulus programme in the next couple of months.
Also influencing the Pound will be the publication of the UK’s latest PMI figures, which could put some downward pressure on Sterling if they show that economic activity in the private sector continued to moderate this month.
Meanwhile, the release of the Eurozone’s own PMI figures will no doubt be the focus for EUR investors next week.
September’s preliminary figures could help to prop up the Euro in the latter half of the week as economists forecast private sector growth in the bloc will have remained fairly robust.
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