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GBP/EUR Exchange Rate Nosedives Following ‘Dovish Rate Hike’ from BoE

Last week’s high: EU$1.1285

Last week’s low:  EU$1.1202

Pound Plummets as Rate Hike Appears to be a One-Off

The Pound Euro (GBP/EUR) exchange rate started off last week’s session on the back foot in thin Sterling trade during the lead up to an expected rate hike from the Bank of England (BoE) left the Euro to jump following some robust German inflation figures.

Some mixed Eurozone data saw the pairing recoup most of these losses in the mid-week, however, with a dip in Eurozone GDP offsetting some strong inflation and employment figures.

The real catalyst for movement however was of course the BoE’s rate decision on Thursday, with the Pound facing a sharp sell-off as a dovish outlook from the bank undermined its decision to raise interest rates.

These losses were further exacerbated at the very tail end of the week as BoE Governor Mark Carney warned that the risk of a no-deal Brexit was ‘uncomfortably high’, while the latest UK services PMI printed lower than expected.

EUR Outlook: Will Weak German Industrial Data Drag on the Euro?

Looking ahead, the GBP/EUR exchange rate could recoup some of its losses at the start of this week following the latest German industrial data.

Economists are forecasting that both factory orders and industrial production will have contracted in June, hinting that Europe’s largest economy may have slowed at the end of the second quarter.

Meanwhile any major movement in the Pound this week is likely to come at the very tail end of the session, with Sterling poised to rise if the UK’s GDP figures improves in the second quarter in line with market expectations.

 

Key Events

6th August

07:00 DE Factory Orders (Jun)

08:30 DE Construction PMI (Jul)

7th August

07:00 DE Industrial Production (Jun)

07:00 DE Trade Balance (Jun)

10th August

07:45 FR Industrial Production (Jun)

09:30 UK Industrial Production (Jun)

09:30 UK Trade Balance (Jun)

09:30 UK GDP (Jun)

09:30 UK GDP Estimate (Q2)

 

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To keep up to date with the Euro, visit the EUR blog in our Currency News section.

 

Michael Vaughan

Currency Trader

mgv@fcgworld.co.uk

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