The Pound to Euro (GBP/EUR) exchange rate rallied last week as alarm over Europe’s coronavirus resurgence continued to grow.
What’s Been Happening: Euro Sinks on Coronavirus Concerns
The Euro was placed on the defensive through last week’s session as EUR investors were spooked by the resurgence of coronavirus cases across Europe.
As cases continue to climb throughout the continent, fears grow that some countries may be forced to re-introduce some lockdown restrictions.
Also taking its toll on the Euro last week was the publication of the Eurozone’s latest PMIs, as August’s preliminary figures revealed the bloc’s economic recovery has already begun to stall.
Meanwhile, the Pound was met by some volatility last week, in response to mixed Brexit sentiment.
This initially saw GBP investors welcome some optimism from Number 10 on the chances for a deal next month, before being shot down at the end of week after EU Chief Negotiator Michel Barnier suggested a deal currently ‘seems unlikely’.
Also resulting in some volatility was the UK’s latest data releases, with a spike in the UK’s headline PMI figures undermined by concerns over the pace of job cuts in the private sector.
Three Things to Watch Out for This Week
1. European Coronavirus Statistics
Continuing to act as the main catalyst for the GBP/EUR exchange rate this week will be ongoing concerns over Europe’s coronavirus resurgence, with a further spike in cases further undermining the appeal of the Euro.
2. German GDP
Also influencing EUR exchange rates this week will be Germany’s final Q2 GDP reading, with confirmation that Europe’s largest economy suffered a record contraction, likely to limit any upside in the single currency.
3. BoE Bailey Speech
For GBP investors the focus this week looks to be on scheduled remarks by Bank of England (BoE) Governor Andrew Bailey. Expect this to infuse some volatility into the Pound should he indicate that negative interest rates remain a possibility.
GBP/EUR Forecast
Looking ahead, the GBP/EUR exchange rate is likely to remain volatile this week as renewed coronavirus concerns continue to hang over markets.