The Pound Euro exchange rate traded in a wide range over the past week, with the publication of the UK’s Autumn Statement acting as a particular source of volatility.
Pound rocked by UK government’s Autumn Statement
The Pound initially struggled this week, as some gloomy headlines regarding the UK retail sector stoked concerns over the wider economy.
Despite a mixed jobs report, Sterling was quick to bounce back on Tuesday. Another sign that US inflation is cooling, both cheered market sentiment and eased concerns over the impact higher US interest rates could have on the UK economy.
This volatility then persisted into the middle of the week as some hawkish comments from Bank of England (BoE) Governor Andrew Bailey helped to counter losses stemming from the UK’s latest consumer price index, after it reported domestic inflation rocketed to a 40-year high in October.
The Pound then continued to fluctuate after Chancellor Jeremy Hunt unveiled his Autumn Statement. While his tax and spending plans when some way towards restoring the UK’s financial credibility, GBP investors appeared to be spooked by his confirmation the UK is in a recession.
Meanwhile the Euro drew support from some positive Eurozone and German data releases through the first half of the week, before facing a major setback following the news Poland had been struck by a missile.
While it was quickly established this was likely not a Russian missile, fears the war in Ukraine is spilling over into the rest of Europe kept the pressure on the Euro in mid-week trade.
The single currency then firmed in the latter half of the week on the back of some hawkish comments from European Central Bank (ECB) policymakers.
UK and Eurozone PMIs in the spotlight
Turning to next week’s session, the primary focus for both GBP and EUR investors looks to be on the latest PMI releases from both the UK and Eurozone.
November’s preliminary releases will offer more insight into how sharply economic growth in the UK and Eurozone is slowing in the fourth quarter.
First up will be the Eurozone releases. Analysts forecast both the manufacturing and service sectors will report growth continued to slow in November, likely weakening the appeal of the Euro.
The UK PMIs are expected to paint a similar picture, with growth in the UK’s private sector expected to have remained firmly in contraction territory this month. Will recession concerns lead the UK releases to have a disproportionate impact on the Pound?
Also of note to EUR investors will be the publication of Germany’s latest GDP figures. The finalised release for the third quarter is expected to confirm the Eurozone’s largest economy expanded by 0.3% over the summer, but could an unexpected revision inject some volatility into the Euro?
Turning to 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.
