GBP/EUR: Will ECB Minutes Boost Euro vs. Pound?
  • Pound (GBP) fell last week on recession fears
  • UK public holiday could mean light trading volumes
  • Euro (EUR) rises after Lagarde speaks at Jackson Hole
  • Eurozone inflation and ECB minutes released this week

The Pound Euro (GBP/EUR) exchange rate is rising at the start of the week after falling across last week. The pair fell -0.63% in the previous week, settling on Friday at €1.1641 and trading in a range between €1.1644 – €1.1778. At 07:35 UTC, GBP/EUR trades +0.11% at €1.1654.

The pound fell last week amid rising concerns over the health of the UK economy after weaker-than-expected business activity data in August. The data showed that the dominant services sector and manufacturing activity shrank, raising the prospect of a recession in the current quarter.

Despite slightly more upbeat data on Friday, the pound was unable to gain ground. UK consumer confidence improved in August by more than expected. Consumer confidence rose to -25, up from -30 in July and was well ahead of forecasts of -29. While a more confident consumer usually mean they are happier spending, it’s worth noting that retail sales have been weak in recent months.

There is no high impacting UK economic data today. Given the late summer bank holiday, trading volumes in the pound could be light.

Looking out across the week, the UK economic calendar is light, so sentiment is likely to drive GBP.

The euro rose across the previous week despite weak data. The PMI figures showed that business activity contracted by more than expected and German IFO business sentiment also fell by more than analysts anticipated to 85.7 from 87.4. The weak figures raise the prospect of a pro-longed recession in the eurozone’s largest economy.

However, a hawkish-sounding European Central Bank President, Christine Lagarde, boosted the euro. Speaking at the Jackson Hole Symposium in the US, Christine Lagarde said that interest rates will need to stay high for “as long as necessary” to slow inflation which is still too high.

Looking ahead, there is no high impacting eurozone due to be released today. The President of the German Bundesbank is due to speak. Looking out across the week, the release of eurozone inflation figures on Wednesday, as well as the ECB minutes, will be watched closely.