GBP/EUR exchange rate week review: pound strikes two-week low against euro
Better-than-expected macroeconomic data from the bloc dragged the pound to a two-week low against the euro ahead of the BoE's May rate announcement.
(06/05/2024 to 10/05/2024)
Monday
The May Day public holiday in the UK left the pound euro (GBP/EUR) exchange rate exposed to macroeconomic data from the Eurozone area.
The pair traversed the 1.16 mid-range amid a cooling producer price index in the bloc and expansion in the area’s services sector after the PMI rose to an 11-month high.
Tuesday
The pound hit a 13-day low around 1.162 against the euro following mixed economic data from the Eurozone.
German factory orders unexpectedly fell in March, despite forecasts for growth by economists. An uptick in German exports broke the single currency’s fall before better-than-forecast retail sales across the Eurozone gave the euro a shot in the arm.
A lack of market moving data from the UK economy created headwinds for the pound against a backdrop of shifting interest rate cut speculations ahead of the Bank of England’s (BoE) May policy decision.
Wednesday
The pound’s downward trend saw it strike a two-week low against the euro just above 1.16 following better-than-expected prints from the bloc.
German industrial production figures for March boosted the single currency. Despite the first contraction in the sector within a three-month period, the fall was less than expected by economists thanks to robust construction.
The pound treaded water amid an absence of notable data as investors refrained from placing aggressive bets ahead of the BoE’s interest rate decision the following day.
Thursday
The pound euro rate drifted lower after the BoE kept interest rates on hold at 5.25% for a sixth consecutive meeting before hinting at a June cut provided policymakers see more evidence of cooling inflation.
In its accompanying statement, the central bank said inflation was already on course to hit its 2% target and would fall to just 1.6% in two years, paving the way to future cuts in borrowing costs.
Meanwhile, the euro was tepid amid a lack of impactful data releases from the bloc.
Friday
The pound trimmed its losses against the euro, rising to 1.162, after the latest UK GDP print showed the economy has officially emerged from recession.
The UK economy grew by 0.6% during the first quarter, according to official figures. It was the strongest rate of quarterly growth since the end of 2021, and much better than the general consensus for a 0.4% expansion.
The upturn was driven by an increase in activity across the services sector, which has flourished this year as wages have outstripped inflation, easing the pressure on consumers. However, economists expect the economy to grow slowly this year as the cost-of-living crisis continues to bite.
With macroeconomic data from the bloc still thin on the ground the euro traded without a firm footing.
Some ECB officials deemed it appropriate to cut interest rates when they convened in April, according to the latest ECB Monetary Policy Meeting Accounts – a dovish outlook that weighed on the single currency.
The pair ended the week at 1.161.
Looking ahead
For the pound, the main catalyst for movement could come from jobs figures on Tuesday and the Monetary Policy Report Hearings on Wednesday.
If, as expected, the UK’s unemployment rate ticks slightly higher and regular pay growth declines, the data could spur the BoE to cut interest rates in the summer, sapping pound sentiment.
The Eurozone GDP print for the first quarter hits the headlines on Wednesday, which is forecast to remain unchanged.