The Pound Euro exchange rate fluctuated over the past week, as some mixed UK economic releases kept investors on their toes.
Pound finds fleeting gains following broadly upbeat inflation figures
The Pound Euro exchange rate initially stumbled this week as the single currency received a shot in the arm after Ukraine’s successful counteroffensive against Russian forces in the east bolstered hopes for an earlier-than-expected end to the war.
However Sterling was quick to find its feet again with the publication of the UK’s latest jobs report, after July’s figures reported domestic unemployment fell to a new 48-year low and wage growth accelerated at a faster-than-expected pace.
This upside was then reinforced by the publication of the UK’s consumer price index, after an uptick in core inflation bolstered expectations the Bank of England (BoE) could deliver a 75bps rate hike this month.
Meanwhile the euro struggled to hold its ground, with another slump in German economic sentiment and a spike in the US Dollar taking their toll on the single currency.
The second half of the week then saw the GBP/EUR exchange rate come plummeting back to earth.
The Euro rallied on the back of some hawkish comments from European Central Bank (ECB) Vice President Luis de Guindos, in which he urged the bank to prioritise tackling inflation over sustaining growth.
Meanwhile, the Pound fell victim to renewed Brexit uncertainty and a lacklustre UK retail sales print.
BoE interest rate decision in the spotlight
Centre stage next week will undoubtedly be the BoE’s latest interest rate decision.
If the BoE raises interest rates by 75bps as some analysts suspect we are likely to see the Pound strengthen.
On the other hand if the BoE opts to remain cautious and delivers a 50bps hike the Sterling could tumble amid concerns the bank is falling behind the curve.
Also influencing GBP exchange rates will be the UK’s latest PMIs, with the Pound likely to weaken if private sector growth continued to contract in September.
The Eurozone will also publish its September PMI next week. These could weigh heavily on the Euro if this month’s preliminary figures report the contraction in the bloc’s manufacturing and services sectors deepened.
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