The Pound to Euro exchange rate trended broadly higher this week, as GBP investors were seemingly able to shrug off an underwhelming UK GDP release
GBP/EUR firms despite the UK’s economic recovery losing momentum
The Pound initially got off to a strong start this week, with the currency rebounding from the previous week’s losses as its recent fall made it more attractive to price-conscious investors.
Sterling attempted to extend these gains in mid-week trade, but faltered in the face of heightened Brexit jitters.
The recent of the UK’s latest GDP figures then undermined GBP exchange rates on Thursday, after the preliminary estimate for the third quarter reported domestic growth lower to 1.3% versus 1.5% forecast and down from 5.5% in Q2.
However, the Pound was quick to shrug off the lacklustre growth figures, closing the week on a positive note.
The Euro, meanwhile, fluctuated through the first half of the week, as some dovish comments from European Central Bank (ECB) chief economist Philip Lane, offset a surprise improvement in Germany’s latest economic sentiment index.
The single currency then faced some headwinds through the latter half of the session due to its strong negative correlation with the US Dollar, as well as an escalation of tensions between the EU and Belarus, with the latter threatening to cut gas supplies to Europe.
High impact UK data releases to influence BoE rate hike odds?
Looking ahead, a couple of high impact UK data releases could result in some notable movement in the Pound Euro exchange rate next week, as they are likely to be seen as directly influencing the chances of the Bank of England raising interest rates before 2022.
Up first will be the UK’s latest jobs report, with Sterling potentially finding support if unemployment remained at a one-year low as the furlough scheme came to an end.
However, the UK’s consumer price index may prove to be the more impactful release, amidst forecasts that domestic inflation will have rocketed up to 3.9% in October, with fears over the pressures on consumers potentially placing more pressure on the BoE to take action.
Meanwhile, the focus for EUR investors will likely be on the Eurozone’s latest GDP release. The second estimate for third quarter growth is expected to confirm the pace of growth in the bloc accelerated to 2.2%, potentially extending some support to the Euro.
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