The Pound Euro exchange rate fluctuated this week, briefly striking an 18-month high, before quickly retreating amid some mixed UK data.
Pound fluctuates on uneven data
The Pound Euro exchange rate got off to a positive start this week. The single currency was meet by initial pressure following dovish comments from European Central Bank (ECB) policymaker Fabio Panetta.
The upside in GBP/EUR then accelerated with the publication of the UK’s latest jobs report. As a surprise drop in unemployment and stronger-than-expected wage growth dampened Bank of England (BoE) interest rate cut expectations.
This was more than enough to offset an uptick in Germany’s latest ZEW economic sentiment index.
After striking a new 18-month high, the GBP/EUR exchange rate then came crashing back to earth on Wednesday in response to a weaker-than-expected UK inflation print, which revived expectations for an imminent BoE rate cut.
The GBP selling bias was then reinforced in the second half of the week with the publication of the UK’s latest GDP figures. These reported that a larger-than-expected contraction of growth in the last quarter of 2023, tipped the UK into a technical recession, further stoking BoE rate cut bets.
Closing out the week was the publication of the UK’s latest retail sales figures. While January’s figures smashed expectations, it wasn’t enough to offset the dreadful UK data released earlier in the week.
UK and Eurozone PMIs in the spotlight
Turning to next week, the publication of the UK and Eurozone’s latest PMI data is likely to act as the main catalyst of movement for the Pound Euro exchange rate.
The UK’s preliminary figures could provide another boost for the Pound if they report that activity in the UK’s vital services sector continued to accelerate this month.
Meanwhile, the Eurozone’s latest PMI figures are forecast to report the bloc’s private sector continued to contract this month, which is likely to drag on the single currency next week.
However, the Euro could receive a boost ahead of the PMI release, if the Eurozone’s latest consumer confidence data reports another improvement in household morale.
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