Pound Euro exchange rate seesaws on mixed macroeconomic data

The Pound Euro exchange rate continued to trade erratically this week amidst the release of some mixed data from the UK and Eurozone.  

Euro stumbles on abysmal Eurozone PMIs 

The Pound Euro exchange rate initially stumbled this week, Sterling’s initial losses coming on the back of UK recession fears and concerns over the potential economic impact of the UK rail strikes taking place this week. 

Some hawkish comments from a European Central Bank (ECB) policymaker, meanwhile, propelled EUR exchange rates higher. 

The Pound’s losses were then extended with the publication of the UK’s consumer price index. A modest increase in domestic inflation last month dampening Bank of England (BoE) rate hike bets. 

More hawkish comments from another ECB policymaker helped the single currency capitalise on Sterling’s weakness, as Olli Rehn, suggested ‘it is very likely’ that the bank’s September rate hike will be bigger than 25 bps. 

The euro then stumbled on Thursday with the publication of the Eurozone’s latest PMIs, as EUR investors were dismayed by a surprisingly poor performance by both the manufacturing and services sector this month. At the same time, Sterling firmed as the UK’s own PMI releases outperformed expectations. 

Closing out the week was the publication of the UK’s latest retail sales figures. This piled the pressure back on the Pound after a contraction of sales growth last month stoked UK recession fears. 

Further denting Sterling sentiment on Friday were fresh concerns over Boris Johnson’s premiership, after the Conservatives lost two byelections. 

Eurozone inflation in the spotlight 

Looking ahead, it’s likely that the release of the Eurozone’s own CPI figures will dictate the direction of the GBP/EUR exchange rate next week. 

Economists are forecast inflation in the bloc will have continued to accelerate this month, striking a fresh record high in the process. 

This could turbocharge the Euro if it is seen as increasing the odds of the ECB delivering a 50bps hike in September. 

Meanwhile with UK data thin on the ground next week we may see the Pound struggle to attract support, especially if continues to be weighed down by political and economic uncertainty. 

If you’ve got a GBP/EUR currency transfer to arrange, the team at TorFX are on hand to help. Get started now to access bank-beating exchange rates and fast, free transfers. 

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