- Pound (GBP) advances after gains last week
- UK GDP expected to rise 0.1% MoM
- Euro (EUR) fell last week as the outlook darkens
- No major data today
The Pound Euro (GBP/EUR) exchange rate is climbing higher, adding to gains from last week. The pair gained 0.5% across the week settling on Friday at €1.1706 after trading in a range between €1.1636 – €1.1787. At 05:45 UTC, GBP/EUR trades +0.08% at €1.1715.
The pound gained against the euro after UK Prime Minister Boris Johnson survived a vote of no confidence last week. The margin was, however, extremely small at just 59%. Still, he has pledged to make changes to ease the economic burden on many, with tax cuts expected to come sooner rather than later.
Looking ahead, this is a big week for the pound with GDP data, unemployment figures, and the Bank of England interest rate decision. The central bank is widely expected to hike rates by 25 basis points for the fourth consecutive meeting.
Today attention will be on GDP data, which is expected to show growth of 0.1% on a monthly basis in April after contracting -0.1% in March. Weak growth could drag the pound lower.
The euro fell in the previous week as fears over the outlook for the region hit the euro despite the European Central Bank adopting a more hawkish stance. The central bank held monetary policy unchanged, as was expected, and also pre-committed to a 25-basis point rate hike in July with another hike in September. However, the ECB slashed the economic outlook for the reason and also increased its inflation forecast to 6.8%, well above the 5.1% previously predicted.
ECB governor Christine Lagarde cited the war in Ukraine, lifting energy prices and food prices significantly as the reason for the deteriorating outlook.
In addition to the deteriorating outlook, the surging USD is also dragging on the USD. The euro trades inversely to the USD and the USD soared after data revealed that inflation in the US unexpectedly rose to 8.6%.
Looking ahead, there is no high impacting eurozone data today. Across the week, German and eurozone inflation data will be in focus.