GBP/EUR exchange rate midweek update: pound trades sideways against euro amid data lull
The pound euro (GBP/EUR) exchange rate was subdued amid a lack of market-moving data from the UK and the Eurozone.
(19/08/2024 to 21/08/2024)
Monday
The pound euro (GBP/EUR) exchange rate was subdued amid a bare economic calendar in both the UK and the Eurozone.
The euro was muted as a lack of fresh data left investors to contemplate last week’s disappointing sentiment index and industrial production statistics from the bloc.
Tuesday
The euro was undermined by signs of easing price pressures in the German economy in July, lifting the pound to around 1.173. The latest producer price index for the Eurozone’s largest economy printed at -0.8% as forecast, decelerating from a 1.6% decrease in June.
The single currency regained some traction following confirmation that Eurozone inflation ticked up to 2.6% in July, a slight rise from 2.5% in June, surpassing initial economist estimates of a dip to 2.4%. The uptick dampened expectations for further interest rate cuts by the European Central Bank (ECB).
The pound was largely subdued amid an ongoing UK data lull that allowed investor expectations for a slower policy easing cycle from the BoE than other major central banks to underpin the UK currency.
Wednesday
The pound euro rate traded sideways just above the 1.17 level as investors digested the UK’s latest public sector borrowing figures.
Figures published by the Office for National Statistics showed the UK government borrowed £3.1bn in July, more than double the £1.5bn forecast. Investor sentiment towards the pound subsequently waned amid speculation that Chancellor Rachel Reeves could be forced to raise taxes and cut spending in the upcoming budget.
Euro sentiment was sapped by its negative correlation with the dollar as the US currency recovered from recent lows.
Fresh ECB interest rate cut speculation also undermined the single currency, with investors dialling up bets on the central bank loosening policy again when it next meets in September.
Looking ahead
The latest PMI figures from both the UK and Eurozone hit the headlines on Thursday. The UK services print will be closely watched by investors, with August’s preliminary figures forecast to report a modest acceleration of growth in the UK’s powerhouse sector, potentially supporting the pound.
Conversely, the euro may be dented if the Eurozone’s PMI figures print in line with forecasts and report that the bloc’s private sector continued to edge closer to contraction territory.
Publication of the minutes from the ECB’s latest policy meeting will also be in focus for investors in the euro on Thursday, who will be looking for clues about the likelihood of a September interest rate cut.