GBP/EUR exchange rate week review: pound rangebound versus euro
The pound euro (GBP/EUR) exchange rate traded sideways amid a slew of economic indicators from both sides, including an encouraging UK GDP reading.
(07/10/2024 to 11/10/2024)
Monday
The pound euro (GBP/EUR) exchange rate was on the backfoot following the publication of encouraging data from the Eurozone that showed retail sales grew in line with forecasts in August, having flatlined the previous month. This prompted investors to unwind bets on an interest rate cut from the European Central Bank (ECB), bolstering the euro. The pair subsequently dropped to a whisker above the 1.19 benchmark.
However, the euro’s upside was limited by lacklustre German factory data which reported that orders posted their worst decline since January.
Tuesday
The pound euro rate bounced off a four-day low of 1.1895 following stronger-than-forecast German industrial production data that reported an impressive recovery in August following a sharp decline the previous month.
However, dovish remarks from ECB rate-setter Mārtiņš Kazāks, who continued to bang the drum for an interest rate cut this month, kept a lid on euro gains.
Wednesday
The pound was subdued versus the euro, trading around 1.1933, despite news of a swelling German trade surplus, which outstripped expectations. However, the euro struggled to attract investor attention.
An absence of macroeconomic data from the UK saw the pound trade sideways despite a cautious market mood that favoured the single currency.
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Thursday
The pound firmed to around 1.196 against the euro ahead of the ECB’s September meeting minutes, only for its bright start to be dulled by their release. Policymakers refrained from declaring victory over inflation, instead favouring a ‘gradual approach’ to reducing borrowing costs – a hawkish view that contradicted recent calls for rate cuts from central bank officials.
This lent the euro some modest support, although the minutes failed to impair current speculation of two more ECB rate cuts this year, including this month.
The pound was undermined by concerns that the UK Autumn Budget could serve up over-borrowing, leading to a run on government bonds.
Friday
The pound euro rate was rangebound following the publication of the UK’s latest GDP reading, ending the week around 1.193.
The UK economy grew by 0.2% in August, with the uptick in GDP following two successive months of stagnation. The services sector rose by 0.1% in August after a similar increase in July, representing the biggest contribution to growth. However, officials said the "broader picture" was one of slowing growth so far in the second half of the year, stymying pound sentiment.
Looking ahead
A raft of market-moving data is scheduled for release from both sides next week, including the UK consumer price index and the German ZEW economic sentiment index – both on Tuesday.
The ECB is gearing up to cut interest rates on Thursday amid souring economic prospects across the bloc. Financial markets have almost fully priced in a quarter-point rate cut, which could help the euro absorb the widely expected move.