ExchangeRates.org.uk - At time of writing GBP/EUR was trading at around €1.2028. Up roughly 0.7% from last week’s opening levels. The Euro (EUR) plunged last week in a session dominated by the ECB’s latest interest rate decision. The single currency was mostly subdued through the first half of the week, with caution ahead of the ECB’s rate decision overshadowing better-than-expected economic sentiment figures from Germany. EUR exchange rates nosedived on Thursday as the ECB concluded its October policy meeting. Although the bank’s decision to cut rates by 25bps was widely expected, EUR still retreated as the ECB said the disinflationary process is ‘well on track’. Signalling to EUR investors that more cuts may be on the cards at the ECB’s upcoming meetings. These losses were compounded as September’s finalised Eurozone inflation print was revised lower. The Pound traded in a wide range last week as GBP investors were kept on their toes by a number of high-impact UK data releases.
Sterling sentiment was initially buoyed by the release of the UK’s latest labour report. As while August’s figures reported wage growth continued to cool, GBP investors cheered a surprise fall in unemployment. However, the Pound faced a major setback in the middle of the week, with the publication of the UK’s latest consumer price index. September’s figures reported inflation cooled from 2.2% to 1.7%, firmly below the Bank of England’s (BoE) 2% target and fuelling bets the bank will deliver consecutive interest rate cuts in November and December. Sterling then closed the week on a positive note, following the publication of the UK’s latest retail sales figures. While September’s data reported sales growth slowed from 1% to 0.3% in September, this outpaced forecasts for a 0.3% contraction.
GBP/EUR Forecast: UK and Eurozone PMIs in the spotlight
Looking ahead to this week’s session, the release of the latest PMIs from both the UK and Eurozone is likely to be a key driver of movement in the Pound to Euro exchange rate. GBP investors will be watching closely for signs that growth in the UK’s private sector picked up pace this month. However, the pound could face pressure if October's preliminary data reveals that activity remained sluggish, with businesses showing caution ahead of the upcoming UK budget. Meanwhile, after last month’s contraction in the Eurozone’s private sector, EUR investors may approach October’s figures with caution. Another disappointing PMI reading could see the euro hit fresh multi-month lows against the pound.
This content was originally published on ExchangeRates.org.uk