GBP/EUR: Pound Heads Higher As EU To Mull Over Brexit Extension
  • Pound (GBP) jumped over 1% last week
  • Inflation, unemployment & retail sales data is due this week
  • Euro (EUR) drifted lower in the previous week
  • Eurozone Q4 GDP is due later this week

The Pound Euro (GBP/EUR) exchange rate is holding steady after strong gains last week. The pair gained 1.1% in the previous week, settling on Friday at €1.1285, after trading in a range between €1.1151 – €1.1337. At 05:45 UTC, GBP/EUR trades +0.02% at €1.1287.

The pound ended flat on Friday, snapping a four-day winning run after UK GDP data showed that the UK economy stalled in the final three months of the year, avoiding a recession. However, output in December contracted 0.5% month on month, in part owing to industrial action across the country. This was larger than the 0.3% contraction that analysts had been expecting.

Still, the outlook for the UK economy remains challenging, and a recession is expected this year, although the Bank of England now forecasts a milder recession than previously feared. The central bank expects the UK economy to slip into recession in the first quarter of this year and could last around 5 consecutive quarters.

Today there is no high impacting UK economic data. Instead, investors will be looking ahead to the release of UK unemployment data, inflation data, and retail sales figures. The details will be key for assessing where the Bank of England may take interest rates.

The euro fell last week amid an absence of fresh clues regarding monetary stimulus and a mixed bag of macroeconomic data. Retail sales tumbled 2.8%, and German factory orders plunged 10.1% year on year in December. Still, expectations are for a milder recession in the bloc than previously feared, even if the data last week suggested otherwise.

Today there is no high-impacting eurozone economic data releases leaving sentiment in control of the euro.

Looking ahead, eurozone GDP data will be under the spotlight and is expected to confirm the initial reading showing that the economy grew 0.1% quarter on quarter after rising 0.3% in Q3.