The Pound to Euro exchange rate trended higher through last week’s session, as market’s welcomed Rishi Sunak’s announcement of a new stimulus package.
What’s Been Happening: Pound Firms as New Stimulus Aims to Protect Jobs
After an initial wobble, the Pound struck higher last week, aided by a drop in the Euro as well as Rishi Sunak’s latest stimulus announcement.
The Chancellor unveiled a new stimulus package worth £30bn, aimed and protecting and creating jobs, through VAT cuts and incentives for business to bring employees back from furlough.
However, the upside in Sterling petered out in the second half of the week, amidst fresh Brexit uncertainty as EU officials warned that ‘significant differences’ remained following the latest round of talks.
The Euro, meanwhile, was undermined at the start of last week by the European Commission’s latest economic forecasts, as it slashed its 2020 Eurozone growth forecast from –7.7% to –8.7%.
Applying further pressure to the single currency were also concerns regarding the EU’s €750bn coronavirus recovery fund as European Council President Charles Michel warned a lot more work needs to be done in order to reach an agreement.
Three Things to Watch Out for This Week
1. EU Summit
The highlight of this week looks to be the latest EU summit of leaders. Top of the agenda will be the EU’s coronavirus recovery fund, with the Euro poised to weaken if leaders look unlikely to reach an agreement.
2. ECB Rate Decision
Also in focus for EUR investors this week will be the European Central Bank’s (ECB) latest rate decision. Expect the ECB to stay pat on Thursday as they wait for EU leaders to reach a decision on fiscal stimulus.
3. UK Data
For GBP investors there will be a slew of UK economic data to mull over this week, the most influential of which likely being May’s GDP figures.
Looking ahead, all eyes will be on the EU summit of leaders this week, with the GBP/EUR exchange rate likely to maintain its upward trajectory if the ‘frugal four’ seek to block an agreement.