Pound-Euro could remain under pressure if ECB minutes reinforce September rate hike bets, while Sterling lacks fresh domestic catalysts.
The Pound to Euro (GBP/EUR) exchange rate trended broadly lower last week as UK economic data failed to build confidence amongst GBP investors.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1665. Down roughly 0.2% from the start of last week’s session.
DAILY RECAP:
The Pound (GBP) was met by volatility last week as a series of UK economic releases painted an inconsistent picture of the domestic economy, leaving investors with little clarity over the outlook for Bank of England (BoE) monetary policy.
Sterling came under pressure at the beginning of the week after employment figures revealed that unemployment remained stuck at 4.9%, while wage growth slowed to its weakest level since late 2020 among private-sector workers.
The Pound failed to find much support from Wednesday’s inflation figures either, with an acceleration in price growth doing little to strengthen expectations that the BoE will resume raising interest rates later this year.
Sterling subsequently attempted to recover, but its gains faded as a steep drop in retail sales undermined confidence in the UK consumer economy. Even a stronger-than-expected set of PMI readings offered limited support, leaving GBP exchanges subdued heading into the weekend.
The Euro (EUR) drifted higher through the first half of last week, with the single currency attracting modest support amid a stronger-than-expected improvement in German economic sentiment.
The Euro then really started to catch bids in mid-week trade as its inverse trade relationship with the US Dollar (USD) saw EUR demand jump as the ‘Greenback’ nosedived.
However, the single currency was unable to sustain its best levels, being pressured in the latter half of the week by fresh European energy price concerns.
Near-Term GBP/EUR Forecast: ECB Minutes to Offer Direction to the Euro?
Turning to this week, the primary catalyst of movement for the Pound to Euro exchange rate may be the publication of the minutes from the European Central Bank’s (ECB) July policy meeting.
If the minutes indicate that policymakers are open to tightening monetary policy in the short-term it’s likely to bolster bets for a September rate hike and lift the single currency.
Meanwhile, with notable UK economic data set to dry up and UK parliament still in recess, movement in the Pound will likely be linked to wider market trends this week.
Our currency coverage draws on live market data, official economic releases and published bank research.
