• Pound (GBP) rises but set for a weekly loss 
  • Concerns over the UK economic outlook have hurt GBP 
  • Euro (EUR) rose after strong German inflation 
  • Eurozone inflation and GDP data due 

The Pound Euro (GBP/EUR) exchange rate is rising on Friday paring losses from the previous session. The pair settled -0.15% lower on Thursday at €1.1861, after trading in a range between €1.1810 – €1.1934. At 05:45 UTC, GBP/EUR trades +0.10% at €1.1873. The pair is set to fall across the week, marking the second straight week of declines. 

The pound has come under pressure this week amid concerns over the health of the UK economic outlook. Fears have risen that the BoE will struggle to raise interest rates much further without sending the UK economy into recession 

The Bank of England is due to meet next week and announce its monetary policy decision. Expectations are for a 25 basis point rate hike but they could struggle to hike rates much beyond there. 

The euro rose yesterday after data showed that the cost of living in Germany rose to a new record high. German inflation accelerated to 7.8% YoY in April, up from 7.6% as the fallout from the Russia Ukraine war continued to impact energy markets and supply chains. 

Today German GDP data was released and showed that despite soaring prices, Europe’s largest economy managed to grow in the first three months of the year by 0.2%, above the 0.1% forecast and a rise from the -0.3% contraction at the end of 2021. 

Looking ahead data Eurozone data will remain in focus with the release of eurozone inflation data and GDP data. Analysts expect consumer prices to rise again to 7.5% year on year in April, up from 7.4%. Meanwhile, economic growth is expected to hold steady at 0.3% quarter on quarter.  

Any signs that growth is slowing could prompt fears of stagflation and drag on demand for the Euro.