Pound-Euro could struggle to extend gains if UK retail sales and services data disappoint, although weaker Eurozone PMIs may limit Euro upside.
The Pound to Euro (GBP/EUR) exchange rate edged higher on Thursday, with the pairing reversing a portion of Wednesday losses.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1673. Up around 0.2% from the start of Thursday’s session.
DAILY RECAP:
The Euro (EUR) faced headwinds on Thursday as a renewed rise in global energy prices revived concerns over the potential impact of higher input costs on European industry.
With the colder months approaching, investors are increasingly focused on whether the region will be able to rebuild its gas reserves sufficiently, particularly as the disruption to energy supplies from the Middle East continues to keep European gas prices elevated.
European natural gas prices have climbed sharply in recent weeks, while storage levels remain well below those seen at the same point last year.
Although the European Commission has stressed that there is no immediate threat to supply, lower inventories leave the region with a thinner buffer ahead of the winter heating season and increase the risk of further price spikes if demand rises or supply disruptions persist.
This is particularly concerning for energy-intensive industries across the Eurozone, where elevated gas and electricity costs can squeeze profit margins, discourage investment and undermine industrial output.
The Pound (GBP) moved sideways against the majority of its peers on Thursday, catching its breath amid a brief pause in this week’s economic releases.
GBP investors have struggled to find a decisive takeaway from this week’s macroeconomic lineup so far.
Between rising headline inflation and cooling employment indicators, the prints have done little to meaningfully alter bets on whether the Bank of England (BoE) will deliver an interest rate hike before the year is out.
Near-Term GBP/EUR Forecast: Falling Unemployment to Lift Sterling?
Looking ahead to the end of the week, Friday sees the final batch of high-impact UK data cross the wires, with the latest retail sales and PMI figures potentially posing a risk to the Pound Euro exchange rate.
Scheduled for release first is July’s retail data, with Sterling potentially stumbling out of the gate as consensus forecasts pointing toward a contraction in consumer spending at the start of the second quarter.
This will be swiftly followed by August’s preliminary PMIs, which are expected to report a moderation of growth in the UK’s vital services sector.
Friday will also see the publication of the Eurozone’s own flash PMIs, with the Euro potentially facing headwinds if private sector activity in the bloc slowed this month.
Our currency coverage draws on live market data, official economic releases and published bank research.
