Pound Euro exchange rate volatile in response to mixed UK data

The Pound Euro exchange rate fluctuated over the past week in response to some mixed UK data and economic concerns. 

Pound finds fleeting gains amid BoE rate hike speculation 

The Pound Euro exchange rate trended broadly higher through the first half of this week as Sterling sentiment was underpinned by hawkish Bank of England (BoE) rate hike bets. 

This came on the back of the UK’s latest employment and CPI releases as both wage growth and inflation printed above forecast. 

Sterling the faltered in mid-week trade as the BoE rate hike expectations gave way to renewed concerns over the UK’s cost of living crisis and the potential disruption caused by widespread industrial action. 

The end of the week then saw the publication of the UK’s latest retail sales figures, with the Pound still struggling, despite a surprise rebound in sales growth last month. 

The Euro, meanwhile, struggled to hold its ground against the Pound at the start of the week. This was partly attributed to headlines regarding falling water levels in the Rhine and fears this could severely disrupt economic activity in Germany. 

The single currency then mounted a comeback in the middle of the week, despite the latest Eurozone GDP estimate printing below expectations. 

However fresh concerns over European energy security ensured the Euro was unable to consolidate at its best levels. 

Eurozone and UK PMIs in the spotlight 

Turning to next week’s session the primary focus looks to be on the latest PMI releases from both the Eurozone and UK. 

The Eurozone releases are likely to be of particular focus following a contraction in the bloc’s private sector in July. 

If August’s preliminary figures point to another slump in activity then we could see the Euro come under some notable pressure as this is likely to stoke fears of a downturn in the Eurozone economy in the third quarter. 

Also of note to EUR investors will be Germany’s latest IFO business climate indicator in which another slump in morale in the Eurozone’s largest economy could pile more pressure on the single currency. 

Meanwhile, there is a risk the UK PMI releases will report growth in the UK’s manufacturing and services sectors came close to stalling this month, which would likely push the Pound lower. 

Otherwise GBP investors are likely to keep a close eye on UK headlines amid growing economic and political uncertainty. 

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