The Pound to Euro (GBP/EUR) exchange rate sought to bounce back from its recent Brexit woes last week, but found its recovery undermined by the Bank of England (BoE).
Last Week: Pound Nosedives as Brexit Talks in Crisis
The Pound enjoyed some bullish support through the first half of last week, helping GBP/EUR to rebound from a six-month low.
This surge in Sterling came courtesy of fading Brexit jitters, with GBP investors also willing to overlook some lacklustre UK data releases.
However the Pound was unable to maintain its bullish trajectory in the latter half of the week following the BoE’s latest policy meeting.
This saw the BoE report that its policymakers were briefed on how negative interest rates might be introduced, the bank’s strongest signal yet that such policy action could be on the cards.
Meanwhile, the Euro struggled to find support through last week’s session as concerns over Europe’s coronavirus resurgence and imposing of new restrictions in some countries unnerved EUR investors.
Three Things to Watch out for This Week
1. Brexit Developments
With Trade talks between the UK and EU set to resume this week, it’s safe to assume that Brexit will be back in the spotlight for GBP investors, with the Pound likely to face some headwinds if concerns over the UK’s internal markets bill leads to negotiations remaining deadlocked.
2. UK Coronavirus Restrictions
Also set to influence Sterling sentiment this week is the likely announcement of new coronavirus restrictions in the UK. This is likely to see the Pound stumble amid concerns a two-week mini lockdown could disrupt the UK’s economic recovery.
3. Eurozone PMIs
For EUR investors the focus this week looks to be on the Eurozone’s latest PMI releases, with the Euro poised to stumble if September’s preliminary figures add to concerns the bloc’s economic recovery is stalling.
GBP/EUR Exchange Rate Outlook
The GBP/EUR exchange rate is likely to be infused by fresh volatility this week, as Brexit and coronavirus headlines likely act as key catalysts in the pairing.