The Pound to Euro exchange rate moved broadly higher last week, but faced some volatility in light of the European Central Bank’s (ECB) latest stimulus announcement.
What’s Been Happening: EUR Investors Cheer the ECB’s PEPP Expansion
The Euro was on the back foot against the Pound through much of last week, amidst some disappointing Eurozone data.
However the single currency was able to mount a brief recovery on Thursday after the ECB announced it would expand its Pandemic Emergency Purchase Programme (PEPP) by €600bn, allowing its bond purchases to continue into 2021.
Meanwhile the Pound enjoyed some notable support through the session, bolstered by an upbeat market mood and some slightly stronger-than-expected PMI figures.
This uptick in Sterling came even in spite of some fresh Brexit jitters, as Bank of England (BoE) Governor Andrew Bailey reportedly told banks to step up their preparations for a no-deal Brexit, and the EU’s chief negotiator Michel Barnier accused the UK of ‘backtracking’ on previous commitments during the latest round of Brexit trade talks.
Three Things to Watch Out for This Week
- UK GDP
Driving movement in the Pound this week will be the publication of the UK’s monthly GDP release. Sterling is likely to face some headwinds as April’s figures are expected to report the UK economy contracted a startling 20% during the first full month of lockdown.
- Eurozone GDP
Likely limiting any upside in the Euro at the start of this week will be the publication of the Eurozone’s latest GDP estimate as it looks set to confirm growth plunged 3.8% in the first quarter.
- EU Summit
Also in focus for EUR investors this week will be a video conference of EU leaders on Thursday, in which they are expected to discuss the proposals for the EU’s €750bn coronavirus recovery fund.
GBP/EUR Forecast
Looking ahead, its likely we will see the GBP/EUR exchange rate infused with fresh volatility this week, with the UK’s latest GDP release likely to act as a key catalyst of movement.