- Pound (GBP) rose last week after strong data
- UK PMIs rose by more than forecast
- Euro (EUR) is supported by hawkish ECB commentary
- German IFO business climate data is due
The Pound Euro (GBP/EUR) exchange rate is rising, adding to gains from last week. The pair rose +0.25% in the previous week, settling on Friday at €1.1309, after trading in a range between €1.1279 – €1.1376. At 05:45 UTC, GBP/EUR trades +0.13% at €1.1324.
The pound rose against the euro across last week after a series of stronger-than-expected data. UK inflation was higher than expected at 10.1% annually, UK wage growth was also stronger than forecast, and on Friday, business activity data (PMIs) came in ahead of forecasts. These data points will put pressure on the Bank of England to keep hiking interest rates in order to tame inflation.
However, the data wasn’t all strong last week as UK retail sales fell by more than expected, dropping -0.9% month on month, worse than the -0.5% fall forecast. The data highlights the struggles that the UK consumer faces amid high inflation and high-interest rates. If the consumer isn’t holding up then, the BoE may not need to hike rates as aggressively.
This week is a quieter week as far as UK economic data is concerned. Today, there is no high impacting UK economic data.
The euro slipped last week despite more hawkish from European Central Bank officials including President Christine Lagarde. Christine Lagarde said last week that inflation in the eurozone was still too high. Other ECB members have suggested that the central bank will weigh up both 25 and 50 basis point rate hike in the May meeting.
Today attention is on the German IFO a business climate index which is expected to improve again in April climbing to 94 up from 93.3 in March. The eurozone’s largest economy saw a decent improvement in the IFO index last month despite the banking turmoil. A strong reading could help rein in recession fears and boost demand for the euro.
