The Pound Euro exchange rate trended higher over the past week, as the single currency was undermined by some underwhelming Eurozone data.
Euro Sidelined by disappointing data
The Pound Euro exchange rate was initial muted this week as both currencies were undermined by weak manufacturing PMIs.
The pairing then began to trend higher on Tuesday. The Euro was placed on the back foot after Germany reported an unexpected contraction in exports in May. While the increasingly risk-sensitive Pound benefitted from an improving market mood.
EUR exchange rates remained pressured in mid-week trade after the Eurozone’s latest services PMI and PPI figures both printed below expectations.
At the same time, Sterling accelerated as GBP investors began to price in another 50bps interest rate hike from the Bank of England (BoE) in August.
The Pound then maintained a positive trajectory into the second half of the week, although these gains were tempered somewhat by ongoing fears the BoE could tighten the UK into a recession.
Meanwhile, the Euro sought to stem its losses following positive factory orders data from Germany. However this was offset by a weaker-than-expected industrial production figures in addition to the Euro’s negative correlation with the US Dollar.
UK jobs report in the spotlight
Turning to next week, the main catalyst of movement in the pound euro exchange rate is likely to be the UK’s latest jobs report.
If May’s figures report wage growth continued to run hot and unemployment remained near historic lows then this may reinforce BoE rate hike bets, potentially lending more support to the Pound in the process.
Also in focus for GBP investors will be the publication of the UK’s latest GDP figures in the latter half of the week. Could a stalling of growth in May raise fresh concerns over the UK’s economic trajectory and pull Sterling lower on Thursday?
Meanwhile, the publication of Germany’s latest ZEW survey could dent the Euro at the start of the week if economic sentiment continued to deteriorate this month.
Elsewhere, the Euro’s negative correlation with the US Dollar may continued to influence EUR exchange rates, particularly with the US scheduled to publish its latest inflation figures on Wednesday.
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