GBP/EUR exchange rate week review: pound slides from near 11-month high against euro
The pound euro (GBP/EUR) exchange rate fell from a near 11-month high above the 1.19 level following an underwhelming batch of UK data from the Confederation of British Industry.
(22/07/2024 to 26/07/2024)
Monday
The pound euro (GBP/EUR) exchange rate traversed the upper 1.18 mid-range amid a shortage of influential data from the UK or Eurozone.
Investor interest in the euro was maintained by diminishing European Central Bank (ECB) interest rate cut bets, with hawkish rhetoric from the central bank dampening expectations further.
The impact of the data light economic calendar was mirrored by the pound.
Tuesday
The pound remained listless against the euro, holding at similar levels to the previous day.
The single currency was lifted slightly by a further rise in Eurozone consumer confidence in July.
Meanwhile, investor sentiment towards the pound was muted by a continued lack of data and dialled up Bank of England (BoE) interest rate cut bets a week ahead of the central bank’s August policy meeting – a dovish view that’s been stoked by mixed numbers from the UK economy, including stubborn wage growth and contracting UK retail sales.
Wednesday
The pound euro rate was given a shot in the arm, causing it to break through 1.19, near an 11-month high, before UK and the Eurozone preliminary PMIs muted the pair.
Business activity in the UK, which posted a six-month low in June, gained traction this month amid the fastest manufacturing growth in two years and the strongest inflow of new orders since April 2023 – promising signs of further recovery in the UK economy.
The euro was dented by Eurozone PMIs for the services and manufacturing sectors, which fell short of expectations in July.
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Thursday
The pound arrested its gains, sinking into the 1.18 mid-range against the euro following the publication of the UK’s latest industrial trends survey and business optimism index from the CBI, which both printed below forecasts.
The UK currency’s fall was cushioned by Germany’s IFO business climate index, which fell for a third consecutive month to its lowest level since February.
Friday
The pound euro rate meandered through the 1.18 mid-range.
The single currency was little moved by the release of stubborn consumer inflation expectations for the Eurozone, which remained at 2.8% for the coming year having fallen in May to their lowest since September 2021. However, the median forecast for economic growth over the next 12 months dropped to -0.9% from -0.8% in May, which weighed on the euro slightly.
The pound was largely muted by a lack of fresh UK economic data, which brought BoE interest rate expectations back into focus – with markets still split over whether the central bank will trigger its rate-cutting cycle in August.
Looking ahead
A raft of influential figures from the Eurozone in the first half of next week – including inflation data from the bloc on Wednesday – is followed by the BoE’s August policy meeting on Thursday. According to economists, the central bank’s interest rate decision is on a knife-edge.
The UK’s base rate has been held at 5.25% for the last 12 months as part of the BoE’s battle against stubborn inflation. But with the consumer price index cooling to the central bank’s 2% for the past two months, hopes have been raised that it can begin unwinding monetary policy – a move that would apply downward pressure to the pound.