GBP/EUR Remains Steady Amid Economic Uncertainty
GBP/EUR Muted as UK Unemployment Jumps
At the time of writing, the GBP/EUR exchange rate is trading at around €1.1742, virtually unchanged from the previous week but down from a high of €1.1766.
Euro (EUR) Performance:
- The Euro started the week poorly due to disappointing data from the Eurozone’s manufacturing PMI, which, despite showing the best performance since March 2023, confirmed that the sector remains in contraction.
- Germany’s latest jobs report added pressure, revealing the highest unemployment figures since March 2021, raising concerns over the Eurozone’s largest economy.
- Mid-week, the Euro continued to struggle as the growth in the Eurozone’s services sector was revised lower.
- The single currency recovered later in the week following the European Central Bank’s (ECB) announcement of a 25bps rate cut, which was already priced in by the markets. The ECB’s forward guidance, which included raised inflation forecasts for 2024 and 2025 and ambiguous hints about future rate cuts, helped firm EUR exchange rates.
Pound (GBP) Performance: - The Pound gained initially due to the UK’s manufacturing sector growth reaching a two-year high.
- A positive market mood further supported GBP through the first half of the week.
- However, GBP exchange rates faltered later following a Bank of England (BoE) survey indicating a potential fall in inflation, as UK businesses expected lower wage increases over the next year.
Forecast: - The upcoming UK jobs report could significantly influence the GBP/EUR exchange rate. Signs of a cooling labor market and slowing wage growth might result in a pullback in Sterling.
- Conversely, better-than-expected job figures could bolster the Pound.
- UK political developments, including the release of party manifestos ahead of elections, could also impact GBP exchange rates.
- For the Euro, next week’s key data will be the Eurozone’s industrial production figures. A forecast rise in factory output could help lift the single currency.
