This week saw the Pound Euro exchange rate traded in a wide range over the past week, amid fluctuating market sentiment.
Pound rally scuppered by lacklustre GDP release
The Pound Euro exchange rate got off to a solid start this week. This was primarily driven by weakness in the single currency, after a larger-than-expected contraction in German industrial production in August, stoked fears that the Eurozone’s largest economy could be as risk of slipping into a recession.
An upbeat market mood allowed Sterling to maintain a positive trajectory on Tuesday. Although these gains were stymied by the latest forecasts from International Monetary Fund (IMF) as it predicted the UK will be the slowest-growing G7 economy in 2024.
Midweek, the Euro was undermined by Germany’s latest consumer price index, as this confirmed inflation slowed to a 19-month low in September. At the same time, the Pound extended its risk-on driven gains.
Sterling then came crashing back to earth on Thursday with the publication of the UK’s latest GDP figures. While August’s figures showed the UK economy expanded by 0.2% as expected, a downwards revision to July’s figures continued to underpin recession fears.
The end of the week then saw GBP/EUR trade sideways as a wavering market mood left the pairing without any strong directional bias.
Key UK data releases in the spotlight next week
Turning to next week, there are a number of high-impact UK data releases which could drive volatility in the Pound.
Perhaps the most impactful will be the UK’s latest consumer price index. If September’s CPI figures report that inflation continued to cool this could undermine BoE rate hike bets and pull Sterling lower.
The UK’s latest jobs report could also apply pressure to the Pound if August’s release shows wage growth as having decelerated.
On the other hand, GBP exchange rates could receive some support at the end of the week if the UK’s latest retail sales figures show sales growth remained positive last month.
Meanwhile, the publication of Germany’s latest ZEW economic sentiment index will be the primary focus for EUR investors next week. Economists forecast sentiment will have improved modestly this month. Will this be enough to push EUR exchange rates higher?
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