The pound euro exchange rate traded in a wide range this week, mostly in response to some mixed Eurozone data.
Euro faces volatility amid mixed data
The pound euro exchange rate initially stumbled this week before quickly rebounding. This volatility came as Germany’s latest IFO business climate survey reported an unexpected decline in business morale, with sentiment falling to a three-month low.
Sterling’s recovery was aided by a positive shift in market sentiment, which helped to underpin the appeal of the increasingly risk-sensitive currency.
GBP/EUR continued to accelerate through the first half of the week, with the euro being knocked by French election jitters.
However, the pound was then forced to relinquish these gains in the middle of the week as the Confederation of British Industry’s (CBI) latest distributive trades index reported a sharp decline in UK retail sales volumes.
Sterling sentiment remained downbeat on Thursday after a report highlighting a sharp fall in UK jobs listings raised fresh concerns over the strength of the UK labour market. Although a surprise deterioration in Eurozone economic sentiment in June, meant the downside in GBP/EUR was limited.
The GBP/EUR exchange rate then ended the week on a positive note. While the euro stumbled as German unemployment unexpectedly rose to a two-year high, the pound was supported as UK GDP in the first quarter of 2024 was revised higher again.
Election fallout to trigger dramatic swings in GBP/EUR?
Turning to next week it seems safe to assume that political developments on both sides of the Channel will act as the main catalyst of movement for the GBP/EUR exchange rate.
The fallout from the first round of the French election is likely to have an immediate impact on the euro, as this should give us a rough idea of how each party is performing.
This could trigger a sharp slump in EUR exchange rates if the first round of voting points to a hung parliament, as a divided National Assembly could lead to political paralysis in the Eurozone’s second largest economy.
Meanwhile, the people of the UK will go to the polls on Thursday. A victory for Labour appears almost inevitable at this point and this has been largely priced in by GBP investors.
However, there are still questions about the size of the majority will Labour be able to secure as this could impact the party’s policy priorities once it is in office.
If you’ve got a GBP/EUR currency transfer to arrange, the team at TorFX are on hand to help. Get started now to access bank-beating exchange rates and fast, free transfers.
