The Pound Euro exchange rate traded in a wide range this week, with the Eurozone’s latest GDP data and the Bank of England (BoE) decision driving volatility.

Pound rocked by BoE decision

The Pound initially weakened against the Euro this week, as a lack of UK data left Sterling vulnerable to losses.

Meanwhile, stronger-than-expected German GDP data lifted the single currency at the start of the week. EUR continued making gains on Tuesday morning, but weaker Eurozone data and a sharp cooldown in inflation then dented the Euro.

The data cemented expectations that the European Central Bank (ECB) is done raising interest rates, allowing GBP/EUR to strike a one-week high on Wednesday.

However, the Euro managed to regain ground on Thursday morning as the currency enjoyed its strong negative correlation with a weakening US Dollar.

The Bank of England (BoE) interest rate decision then sparked further volatility. While the BoE opted to leave rates unchanged, as expected, the vote was split. Three of the nine policymakers wanted to raise interest rates by 25bps.

This hawkish tilt to the decision helped GBP eventually recoup some losses against EUR, while an upbeat market mood also lifted the riskier Pound against the safer Euro.

Sterling’s upside was limited, however, as the BoE expressed concerns of recession risks.

GBP/EUR then wavered at the end of the week. Stronger UK data and weaker Eurozone data supported the pairing, while a souring mood offset the upside.

UK GDP in the spotlight

Looking ahead to next week’s session, the UK’s third-quarter GDP growth rate is the focus for GBP investors.

Economists say the UK has been flirting with recession over the past year and a half, with GDP remaining largely stagnant. If the latest data shows that the UK economy contracted in the three months to September then worries of a coming downturn could see Sterling slump.

In the meantime, downbeat German data could weigh on the Euro. German factory orders and industrial production are both forecast to have contracted in September. Fresh signs of stress in the Eurozone’s largest economy will likely pressure EUR.

The Eurozone’s latest retail sales data could also impact the single currency. Sales are expected to have shrunk for the third consecutive month in September, which may create additional headwinds for the Euro.

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