GBP/EUR exchange rate week review: pound recovers from five-day low against euro

(19/02/2024 to 23/02/2024)

The GBP/EUR exchange rate crept above 1.17 on Monday, managing to shrug off heightening Bank of England (BoE) interest rate cut bets and UK economic lethargy – a sanguine mood that was soon eroded by a lack of fresh economic data releases.

On Tuesday the pair slid to a five-day low as the data drought sapped the pound’s energy, causing it to fall into the 1.16 mid-range. Investors were left to recall the previous week’s miserable GDP figures and milder-than-anticipated inflation readings that had stoked interest rate cut bets.

The pound to euro exchange rate was initially treading water on Thursday before upbeat PMIs indicated that the UK’s recession could be brief – lifting the pair to within touching distance of the 1.17 benchmark. Notably, the index for the powerhouse services sector held strong at 54.3 in February, exceeding expectations of a slight downturn to 54.1. It was also good news for manufacturing where conditions were shown to be contracting at a slower pace than before.

Meanwhile, the euro was flat after the latest PMI data for the Eurozone offered a mixed economic outlook – with the service sector exceeding expectations and manufacturing falling to a two-month low.

The pound/euro exchange rate broke through the 1.17 benchmark on Friday to touch a four-day high amid warming ECB rate cut bets that were stoked by renewed concerns about the German economy. Investors digested Germany’s finalised GDP figures for the fourth quarter of 2023, with the data confirming that the Eurozone’s largest economy contracted by 0.3% during Q4.

The pound ended the week hovering just above 1.17 against the euro.

Looking ahead

Investors will be monitoring a string of speeches from BoE officials next week for monetary policy signals.

The Harmonised Index of Consumer Prices for the Eurozone hit the headlines on Friday. If, as expected, it drifts lower in February, expectations of ECB rate cuts will heighten – potentially weighing on the euro.