GBP/EUR exchange rate week review: pound recovers to two-year high versus euro
The pound euro (GBP/EUR) exchange rate recovered from news of cooling UK inflation to strike a two-year high after the ECB cut interest rates for a second consecutive month.
(14/10/2024 to 18/10/2024)
Monday
An economic data lull in the UK meant the pound euro (GBP/EUR) exchange rate traded sideways through the 1.19 mid-range.
The euro was also muted three days out from the European Central Bank’s (ECB) latest interest rate decision, with further monetary policy loosening widely expected – a listless start to the week for the single currency that was compounded by an absence of data from the bloc.
Tuesday
The pound euro rate was bolstered by the August jobs report from the UK economy, rising to within a whisker of the 1.20 benchmark.
News that unemployment in the UK fell to its lowest rate since January, and a record number of people were in work, was tempered by another slowdown in wage growth.
The lacklustre average earnings print limited the pound’s gains as investors ramped up Bank of England (BoE) interest rate cut bets.
The euro was subdued despite Germany’s latest ZEW economic sentiment survey reporting a stronger-than-expected uptick in morale in October, as the reading represented the second lowest this year.
Wednesday
The pound euro rate was dealt a chastening blow by September’s consumer price index, which showed UK inflation printed below market expectations – causing the pair to plummet more than 0.5% to around 1.193.
News that both headline and core inflation cooled more than expected opened the door for further BoE rate cuts, which weighed heavily on the pound.
The euro struggled to attract investor attention amid an absence of economic data from within the bloc.
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Thursday
The pair recouped its losses, jumping just above the 1.20 benchmark after the ECB actioned its first back-to-back interest rate cut since 2011 to prevent a sharp slowdown in the eurozone economy – a move that undermined the single currency.
With Germany teetering on the edge of recession and inflation cooling rapidly across the euro area, the ECB lowered its key deposit rate by a further 0.25 percentage points to 3.25%.
Figures earlier in the day showed annual prices growth in the bloc had cooled in September to 1.7%, down from 2.2% the previous month.
Friday
The pound hit a two-year high against the euro in the 1.20 mid-range in the wake of the ECB’s rate cut, amid speculation that the central bank will race to slash interest rates as the eurozone economy falters.
Meanwhile, the pound was underpinned by UK retail sales which grew by 0.3% in September, defying economists’ expectations that they would fall by 0.4%, underscoring the UK economy’s resilience.
Looking ahead
A flurry of speeches from central bank rate-setters on both sides next week will be closely monitored by investors.
PMIs from Germany, the Eurozone and the UK are slated for release on Thursday.
The UK's powerhouse services sector, which has been performing relatively well compared to its European counterparts, is expected to see its PMI figure waver slightly – an outcome that could undermine the pound.
If the PMIs from Germany and the broader Eurozone reflect ongoing weakness in economic activity, the euro could experience further downward pressure.