The Pound to Euro (GBP/EUR) exchange rate fluctuated last week, after the European Central Bank (ECB) expressed its concerns over the current strength of EUR exchange rates.
Last Week: Euro Undermined as ECB Expresses Concerns over EUR Exchange Rates
The Euro took a tumble through the first half of last week, as the ECB flagged concerns over EUR exchange rates.
The Financial Times reported the ECB is growing increasingly concerned regarding the recent surge in EUR exchange rates, amid fears a strong Euro could hamper the Eurozone’s recovery.
Also driving the weakness in the Euro were some lacklustre EUR data releases, mostly notably the latest Eurozone consumer price index, as the bloc was shown to have slipped into deflation last month.
Meanwhile, after a strong start to the session thanks to an upbeat market mood, the Pound fell back in the latter half of the week. Pressure came from renewed Brexit jitters and some dovish comments from the Bank of England (BoE).
These losses were reinforced by a weaker-than-expected services PMI, which stoked concerns over the accelerating pace of job cuts in the UK.
Three Things to Watch out for This Week
1. ECB Policy Meeting
A key focus for EUR investors this week will be the ECB’s latest policy meeting. No changes are expected this week, but downwardly revised inflation forecasts from the bank could exert some pressure on the Euro.
2. Brexit Developments
The Pound faces an uphill battle this week, amidst reports Boris Johnson will announce plans to walk away from Brexit trade talks if a deal is not reached by mid-October. The move is likely to sour the mood of the latest round of negotiations, which get underway later this week.
3. UK GDP
Also in focus for GBP investors this week will be the UK’s latest monthly GDP release. This could offer some relief to Sterling if they point to a robust recovery at the start of the third quarter.
GBP/EUR Exchange Rate Outlook
The GBP/EUR exchange rate may continue to trade in a wide range this week, with both Brexit and the ECB’s latest policy decision likely to infuse the Pound to Euro exchange rate with fresh volatility.