Home » Pound Euro exchange rate wavers on mixed Eurozone inflation

Pound Euro exchange rate wavers on mixed Eurozone inflation

The Pound Euro exchange rate traded in a narrow range this week, with the single currency unable to sustain its attempts to break higher amidst a mixed consumer price index.

Euro fluctuates on mixed CPI figures

The Pound Euro exchange rate initially firmed this week, with Sterling strengthening on the back of comments from Bank of England (BoE) Governor Andrew Bailey, in which he said the bank is very alert to any signs of persistent inflationary pressures.

However GBP/EUR exchange rates quickly retreated again as easing concerns over Europe’s banking sector helped to bolster the Euro.

In the middle of the week a lull in UK economic data resulted in choppy trade in the Pound, with the currency vulnerable to shifting market sentiment. At the same time, the euro was supported as German consumer confidence climbed to a nine-month high.

The second half of the week saw the Euro jump on the back of Germany’s consumer price index, after a stronger-than-expected inflation print helped to reaffirm European Central Bank (ECB) interest rate hike expectations.

The end of the session then saw the Pound rebound from its worst levels. This recovery was initially linked to the UK’s induction into a trans-Pacific trade partnership, before being reinforced after the UK’s latest GDP figures saw growth in the last quarter of 2022 was revised slightly higher.

Meanwhile, the Euro faltered at the end of the week after the Eurozone’s latest CPI figures printed below expectations.

Positive German industrial data to boost the Euro?

A key catalyst of movement in the Pound Euro exchange rate next week is likely to be the publication of the latest data from the German industrial sector.

German factory orders and industrial production are both forecast to have risen in February, albeit at a slower pace than in January. Will a positive reading be enough to underpin the Euro, despite a slowdown in growth?

Also potentially influencing EUR exchange rates will be March’s finalised Eurozone PMIs.  Confirmation the bloc’s private sector expanded at its fastest pace since May 2022, could offer support to the single currency.

The UK will also publish its finalised PMIs next week, but with the UK figures expected to be outperformed by the EUR releases this could leave the Pound on the defensive.

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