GBP/EUR exchange rate touches 10-week high in January
Following a relatively quiet start to the year, the pound euro exchange rate jumped to a 10-week high in the 1.15 mid-range on 5 January. The pair was bolstered by the potential global ramifications of the US intervention in Venezuela, undermining the single currency. Additionally, the move led investors to reassess President Donald Trump’s ongoing comments regarding Greenland.
The pound slipped lower against the euro on 7 and 8 January amid a UK data lull, mixed Eurozone inflation figures for December, and weak UK consumer confidence during the Christmas period.
Having traversed the 1.15 basement, the pound euro rate climbed into the mid-range on 12 January. Donald Trump persisted with claims about controlling Greenland to gain a strategic advantage over China, which pressured the single currency.
The pound softened against the euro on 15 January, despite GDP data showing a 0.3% expansion in the UK economy that eroded expectations for another Bank of England (BoE) interest rate cut in January. However, economists cautioned that the uplift isn’t expected to stop growth from stalling in the final three months of last year.
On 20 January, the pound posted its single biggest daily drop against the euro since November, slumping more than half a per cent into the 1.14 mid-range. The fall was prompted by data showing the UK unemployment rate remained at a multi-year high. This was compounded by a selloff in stock markets in response to escalating geopolitical tensions.
The pound remained pressured the following day despite stronger-than-expected UK inflation figures. Headline inflation increased from 3.2% to 3.4% in December, while core inflation remained steady at 3.2%. Additionally, the rise in services inflation was lower than anticipated.
The pound jumped more than half a per cent into the 1.15 mid-range on 23 January after PMI data showed the UK’s economy grew in January and retail sales figures beat forecasts. Meanwhile, the single currency was undermined by downbeat PMI readings from the Eurozone.
Having drifted lower amid a prolonged UK economic data lull, the pound euro rate rose into the 1.15 mid-range on 28 January. The move higher was sparked by single currency weakness following dovish-leaning comments from a European Central Bank (ECB) policymaker. Austrian economist Martin Kocher indicated that euro strength against the dollar could cool inflation, potentially opening the door to further ECB rate reductions.
The pair remained subdued for the remainder of the month, ending January around 1.155.
GBPEUR: 3-Month Chart
Looking Ahead
BoE’s next monetary policy meeting is scheduled on February 5, when central bank policymakers are widely expected to leave interest rates unchanged at 3.75%.
Influential data from the UK economy in February: GDP (12 February), ILO unemployment Rate (12 February), Consumer Price Index (18 February), Retail Sales (20 February), S&P Global Composite PMI (20 February).
ECB rate-setters also meet on February 5. Economists see no change in interest rates at this meeting, or throughout the rest of the year, as inflation hovers near target.