- Pound (GBP) eases on concerns over the strength of the economic recovery
- UK retail unexpectedly fell, supply chain disruptions weigh
- Euro (EUR) supported by decade high inflation
- Eurozone economic calendar is relatively quiet this week
The Pound Euro (GBP/EUR) exchange rate is edging lower at the start of the week. The pair ended the previous week at €1.1716 approximately the same level that it started the week at. At 05:45 UTC, GBP/EUR trades -0.1% at €1.1701
The Pound failed to gain ground versus the Euro in the previous week despite data revealing that the UK employment was back as pre-pandemic levels and despite inflation surging to a decade high of 3.2%, up from 2% in July and well above the 2.9% forecast. The unemployment rate dropped to 4.6% after the economy added a further 183,000 jobs.
Following the upbeat data bets rose that the Bank of England could raise interest rates sooner rather than later. Expectations of a rate hike were moved forward to mid next year from the end of 2022.
However, UK retail sales were a disappointment and unexpectedly fell for a fourth straight month and supply chain disruptions are weighing. August sales fell by 0.9% well short of the 0.5% increase forecast and raised concerns over the pace of the economic recovery.
This week is a key week for the Pound with the Bank of England monetary policy announcement due on Thursday. Whilst the central bank isn’t expected to raise interest rates it could adopt a more hawkish tone and may even taper bond purchases as inflation rises.
The Eurozone economy also released inflation figures on Friday. The final print for August confirmed the 3% year on year reading also a decade high. Apart from this the Eurozone economic calendar was relatively quiet, leaving the Euro to be directed by the US Dollar. The common currency trades inversely to the greenback.
This coming week is expected to be a quiet week for the Eurozone economic calendar one again. Services and manufacturing PMI data at the end of the week in addition to the German elections next weekend are likely to be the biggest focus for the Euro.