The pound euro exchange rate trended higher over the past week, the upside in the pairing being supported by mostly upbeat UK economic releases. 

GBP/EUR appreciates following flood of UK data 

After a slow start to the week, the pound euro exchange rate received a shot in the arm on Tuesday. 

While Sterling was bolstered by a stronger-than-expected UK jobs report, the euro faltered as Germany’s latest economic sentiment index reported a sharp deterioration of morale in the Eurozone’s largest economy. 

However, the pound was forced to relinquish these gains almost immediately, with GBP/EUR sliding around half a cent on Wednesday, following the publication of the UK’s consumer price index. 

July’s CPI figures reported UK inflation accelerated for the first time this year but at a slower pace than had been forecast. This caused GBP investors to bet on the possibility of the Bank of England (BoE) delivering a back-to-back interest rate cut in September, which weighed heavily on Sterling. 

GBP/EUR then swiftly rebounded as the UK reported a strong expansion of GDP in the second quarter, while at the same time, the euro was undermined by its negative correlation with the US dollar. 

The pound then closed out the week on a positive note after the latest UK retail sales figures reported a solid rebound in sales growth last month. 

UK and Eurozone PMIs in the spotlight 

Turning to next week, the publication of the latest PMIs from both the UK and Eurozone will likely act as the main catalyst of movement in the GBP/EUR exchange rate. 

GBP investors will be hoping to see activity in the UK’s private sector continue to accelerate this month. If August’s preliminary figures signal that momentum in the UK economy is building, then the pound is likely to strengthen. 

At the same time, with growth in the Eurozone’s private sector coming close to stalling last month, EUR investors may be wary of August’s figures. However, this could set the stage for the euro to rally sharply if we see an uptick in activity in this month’s PMIs. 

Also potentially influencing EUR exchange rates next week will be the minutes from the European Central Bank’s (ECB) most recent policy meeting. If the minutes show that policymakers are willing to cut rates again when they return from the summer break, this could drag on the euro. 

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