Pound-to-Euro Forecast For Coming Week: GBP/EUR Exchange Rate Trends Further Away 1.19 (2024)

The Pound Euro (GBP/EUR) exchange rate retreated from its recent highs last week as cooling UK inflation fuelled shifting interest rate cut bets.

The Pound Euro conversion (GBP/EUR) closed at around €1.1811 the previous week.

The Pound (GBP) traded without a clear direction throughout Monday’s session amid a lack of fresh economic releases in the UK. This left the increasingly risk-sensitive Pound largely vulnerable to global risk dynamics, as a shifting market sentiment failed to offer GBP any notable support.

On Tuesday, Sterling faltered against the majority of its rivals amid an ongoing lack of British data. Amid a lack of notable releases, markets prepared for the UK’s looming inflation data and subsequent Bank of England (BoE) interest rate decision. Investors appeared reluctant to place any aggressive bets on Sterling in the interim, leaving GBP to fall mostly flat as the session progressed.

On Wednesday, the UK’s hotly anticipated inflation data saw the latest consumer price index dip to the central bank’s 2% target rate in May, reinforcing market projections that the BoE will lower interest rates in the summer months. However, stickier-than-forecast services inflation served to lend GBP some support amid signs that domestic price pressure remain elevated.

On Thursday, the Bank of England enacted a widely anticipated hold on interest rates. However, GBP faced headwinds as markets perceived the central bank’s forward guidance as largely dovish, and indicative of an August rate cut.

On Friday, mixed UK data then saw GBP trade in a wide range against its peers. While UK retail sales rebounded more than anticipated in May, a worse-than-forecast preliminary services PMI served to limit GBP’s upside potential.

Euro (EUR) Faces Headwinds amid Lacklustre Data

The Euro (EUR) strengthened as the week opened following European Central Bank Chief Economist Philip Lane’s latest commentary. While markets have speculated over an aggressive monetary unwinding cycle from the central bank in recent months, Lane reiterated that the central bank may hold off on lowering interest rates again in the near future, lending EUR some support as investors dialled back their ECB interest rate cut speculations. However, ongoing political uncertainty, stemming from the recent announcement of France’s snap election, capped EUR’s upside potential.

On Tuesday, Germany’s latest ZEW economic sentiment index missed forecasts, leaving the common currency to face headwinds. The index printed at 47.5 in June, marginally rising from the previous month’s reading of 47.1, though missing expectations of a more significant rise to 50.

A lack of fresh data on Wednesday then left the Euro largely subdued against its peers. Meanwhile, investors expressed concerns about the progress made in recent weeks by far-right French political parties, ahead of France’s upcoming election, which further deterred investor interest in the common currency. Meanwhile, a cautiously upbeat market mood limited interest in the safe-haven currency.

Thursday saw the release of the latest German producer price index, which slumped for an eleventh consecutive month, sinking by 2.2% in May. Signs of consistently easing price pressures suggested that the ECB will likely continue to lower interest rates this year, hampering EUR exchange rates.

On Friday, a worse-than-forecast set of preliminary PMIs in the Eurozone left EUR on the defensive. Slowing activity in both the manufacturing and services sector saw the common currency fall flat against the majority of its rivals, indicating an ongoing period of underlying economic weakness across the Euro bloc.

Pound Euro Exchange Rate Forecast: German Data in Focus

Looking ahead, Germany’s latest Ifo business climate indicator is due for release on Monday. An improving sense of economic optimism in the Eurozone’s largest economy may lift the common currency.

Looking to the UK, a lack of notable releases as the week opens could see GBP left rudderless amid ramped-up BoE rate cut bets.