- Pound (GBP) extends treads water after hawkish BoE boost last week
- UK Q2 GDP data due this week
- Euro (EUR) edged lower last week amid quiet calendar
- Eurozone sentiment data & German trade numbers due
The Pound Euro (GBP/EUR) exchange rate is treading water at the start of the week after booking strong gains last week. The pair rallied 0.7% last week hitting a high of €1.1809 before settling on Friday at €1.1792, its third straight week of gains. At 05:45 UTC, GBP/EUR trades +0.02% at €1.1795.
The Pound rallied last week after a boost from the Bank of England. In their latest policy meeting the BoE kept monetary policy unchanged. However, they lifted the inflation forecast to 4% and talked of a need for modest policy tightening. This raised expectations that the BoE could start to taper its asset purchases sooner rather than later. Expectations are now for an interest rate rise from the central bank at the end of 2022 rather than early 2023 where it was previously.
Looking ahead the focus this week will be on the UK Q2 GDP reading which is expected to show the continued rebound of the UK economy as it reopened. Expectations are for the UK economy to grow 4.8% quarter on quarter in the April – June period after contracting -1.6% in the first three months of the year.
Covid will also remain in focus. Covid cases in the UK remain elevated towards 30,000 new daily cases per day, although deaths so far have remained low thanks to the vaccine rollout.
The Euro traded under pressure across the previous week in a relatively quiet week data wise. This week sees the Eurozone economic calendar ramp up again providing more directional cues for the common currency.
Today sees the release of German trade data and Eurozone Sentix investor confidence data for August. Analysts are expecting sentiment to tick slightly lower to 29 this month, down from 29.8 in July.
Looking out across the week, ZEW economic sentiment figures will be in focus tomorrow whilst German inflation figures will dominate on Wednesday.