GBP/EUR exchange rate week review: pound breaks through 1.17 against euro
The euro felt the weight of dovish ECB commentary following the central bank's March rate announcement.
(08/04/2024 to 12/04/2024)
Monday
The pound euro (GBP/EUR) exchange rate was stagnant in the 1.16 mid-range following the release of mixed data from the German economy.
News that the overall trade surplus in the Eurozone’s largest economy fell short of expectations and exports contracted fuelled concerns that it slipped into a recession at the start of the year.
This was offset by industrial production data for February that showed a second consecutive month of growth.
The pound struggled to plot a clear direction amid a lack of domestic data.
Tuesday
The pound rebounded into the 1.16 mid-range after dropping to a 14-day low overnight. Helping it to rally was better-than-forecast retail data for March from the British Retail Consortium (BRC).
The euro was treading water amid a lack of notable releases in the bloc. Investors kept their distance from the single currency ahead of the European Central Bank’s (ECB) policy statement later in the week.
Wednesday
Having reversed its losses, the pound continued to drift higher. Fuelling its advance were expectations for ECB policymakers to signal a June rate cut in commentary following its March meeting – a dovish outlook that weighed on the single currency.
While the ECB was expected to keep interest rates on hold in March, investors were speculating on the central bank’s policy loosening path, with some betting on up to four rate cuts this year.
The pound’s gains were capped by a lack of influential data from the UK economy.
Thursday
The pound euro exchange rate touched a one-week high above 1.17 following the ECB’s latest interest rate decision.
Despite holding rates steady at 4.5% for a sixth consecutive meeting, commentary from ECB boss Christine Lagarde in the aftermath that pointed to imminent policy unwinding caused the euro to slump.
The pound couldn’t cling onto its modest gains following hawkish comments from Bank of England (BoE) official Megan Greene who argued that investors are wrong to bet on early UK rate cuts.
Friday
Having regained its momentum and risen near a two-week high as ECB rate bets continued to stifle the single currency, the pound was tripped up by weaker-than-forecast UK growth in February.
While the UK economy expanded by 0.1%, it wasn’t enough to ease concerns about an ongoing period of economic fragility.
Despite widespread optimism that the UK economy is on the up after sliding into a technical recession at the end of last year, the underwhelming GDP print soured investor sentiment towards the pound.
The embattled euro was dealt a further blow by Germany’s latest inflation data, which reinforced speculation about an ECB rate cut in June.
Inflation in the bloc’s powerhouse economy cooled to 2.2% in March 2024, markedly dropping from the previous month’s 2.5% and easing to its lowest point in almost three years.
Looking ahead
Investors are now betting on only two quarter-point rate cuts from the BoE this year. Wednesday’s inflation data for March from the UK will influence their expectations.
If inflation data from the Eurozone on Wednesday continues to show cooling consumer prices, investors might double down on June rate cut bets, ha