GBP/EUR exchange rate midweek update: pound touches 23-day high versus euro
02/12/2024 to 04/12/2024: With political chaos in France casting a long shadow over economic growth, the pound euro (GBP/EUR) exchange rate struck a 23-day high as investors took flight from the single currency.
Monday
The pound euro (GBP/EUR) exchange rate climbed towards its recent two-and-a-half year high just below the €1.21 level amid political turmoil in France and renewed Trump trade that undermined the single currency.
Worries are mounting about a possible government collapse in France, which would stymie plans to tame an escalating budget deficit. Meanwhile, Donald Trump’s shift from his prior advocacy of a weaker dollar boosted the US currency, causing the euro to soften.
Tuesday
Concerns about the UK’s economic outlook alongside the British Retail Consortium’s retail sales print for November, which pointed to a potential slowdown in consumer activity, left the pound flat.
The euro wavered against a backdrop of political uncertainty in France ahead of a vote of no-confidence in the fragile minority government of Prime Minister Michel Barnier, stoking fears of instability in the Eurozone’s second-largest economy.
The gloomy trading conditions on both sides meant the pound euro exchange rate traded sideways through the 1.20 mid-range.
Wednesday
Dovish remarks from Bank of England (BoE) Governor Andrew Bailey were offset by an underwhelming Eurozone services PMI reading.
Bailey said to “expect four UK rate cuts next year as inflation eases” but reiterated the central bank’s gradual approach.
The Eurozone services PMI for November was revised upwards to 49.5 from 49.2 in the preliminary estimate but was lower than the October reading of 51.6. This marked the first time the sector had slipped into contraction territory (a reading below 50) since January.
The euro absorbed the PMI print but couldn’t withstand the weight of political uncertainty in France. The pound subsequently advanced to a 23-day high a fraction below €1.21, as concerns over the stability of the French government dented the single currency.
Looking ahead
An absence of market-moving data from the UK economy brings two key releases from the Eurozone into sharp focus: retail sales on Thursday and the GDP reading on Friday.
The euro could soften if retail sales in the bloc match forecasts and show a reduction in volumes in October and if GDP stalled in the third quarter, as expected.