Pound Euro exchange rate fluctuates as EUR/USD hits parity

The Pound Euro exchange rate traded without a clear direction this week, with the pairing being overshadowed by the EUR/USD exchange rate striking parity. 

Euro faces uphill battle as EUR/USD drops to 20-year low 

Much of this week was focused on the EUR/USD exchange rate as trended towards parity, leaving the Euro on the back foot through most of the session 

Adding to the Euro’s woes at the start of the week were concerns over start of annual maintenance on the Nord Stream 1 pipeline between Germany and Russia, amidst fears the shut off the largest gas pipeline to Europe could become permanent. 

A dramatic slump in German economic sentiment also didn’t help the single currency in the first half of the week. 

However, a market correction then allowed the Euro to rebound in the second half of the week, despite concerns over the resignation of Mario Draghi as Italian Prime Minister.  

Meanwhile, the Pound was left on the back foot through much of this week as a result of the Conservative leadership race as questions over the candidates’ economic plans stoked political uncertainty.  

On brief bright spot for the Pound was the publication of the UK’s latest GDP figures, which shocked investors by reporting the UK economy expanded by 0.5% in May.  

EUR investors to be disappointed by a 25bps hike? 

Looking ahead to next week’s session, the primary catalyst of movement in the GBP/EUR exchange rate may be the European Central Bank’s (ECB) latest interest rate decision. 

The ECB previously stated it will start its tightening cycle with a modest 25bps hike in July. However, in the face of soaring inflation and a potential 100bps hike from the Federal Reserve some analysts are pushing for a more aggressive hike of 50bps or more. 

This could lead to the euro slumping if the bank sticks to its guns and opts for the relatively cautious hike this month. 

Meanwhile a glut of high-impact UK macroeconomic releases may see the Pound more data driven next week. 

The spotlight likely to be on the UK’s consumer price index, which Sterling sentiment potentially suffering if another spike in inflation exacerbates cost of living concerns. 

Also of note will be the UK’s latest jobs report. May’s average earnings figures will be a key focus and could drag on GBP exchange rates if wage growth continues to lag well behind inflation. 

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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