The Pound to Euro exchange rate fell back last week as concerns over a second wave of coronavirus infections and renewed Brexit uncertainty weighed on the pairing.
What’s Been Happening: Pound Pressured by Coronavirus and Brexit Fears
The Pound struggled last week, with any optimism regarding the UK government’s plans to reopen more of the economy on 4 July quickly being wiped out by an open letter from UK health experts warning the country to prepare for a coronavirus resurgence.
Putting further pressure on Sterling through the latter half of the week were renewed concerns over Brexit, after German Chancellor Angela Merkel appeared to harden her stance, telling the UK that it must ‘live with the consequences’ of its government seeking a harder exit.
Meanwhile, the Euro found some early support last week, as EUR investors cheered some stronger-than-expected PMI figures from the Eurozone this month.
However, it wasn’t all plain sailing for the single currency last week as news the US is preparing to impose $3.1bn worth of tariffs on EU exports, capped the upside in EUR exchange rates.
Three Things to Watch Out for This Week
1. Brexit Talks
At the top of the agenda this week will be the start of a month of ‘intensified’ Brexit talks in hopes the UK and EU can reach a trade deal. However, the chances of a breakthrough appear slim, with a lack of progress likely to weigh on Sterling sentiment this week.
2. Boris Johnson’s Post-Lockdown Economic Plans
Also in focus for GBP investors will be a speech by Boris Johnson on Tuesday, in which the PM is set to outline his plans for a post-Covid economic recovery.
3. Eurozone Inflation
A key catalyst for the Euro this week is likely to be the Eurozone’s latest CPI figures, with EUR investors eager to see if the bloc avoided another month of deflation in June.
Pound to Euro Exchange Rate Forecast
Looking ahead, it’s likely we will see renewed Brexit jitters infuse the Pound to Euro exchange rate with fresh volatility this week, with the Pound poised to extend its recent losses so long as progress remains limited in the latest round of talks.