As UK car sales experienced their worst September in 20 years the GBP/EUR exchange rate came under renewed pressure.
Last Week: Shifting Odds of UK-EU Deal Prompt Significant GBP/EUR Exchange Rate Volatility
The mood towards the Pound saw some major shifts over the last week as markets closely followed the latest developments surrounding Brexit and the final round of UK-EU trade talks.
As the EU initiated legal action against the UK over its controversial internal market bill the GBP/EUR exchange rate came under significant pressure, with investors fearful of the ramifications for the current talks.
However, as both sides continued to express a sense of optimism over the possibility of a final deal being reached the Pound was soon able to recover from its weekly low.
News that the headline Eurozone consumer price index had fallen deeper into negative territory in September also weighed heavily on the Euro ahead of the weekend.
Three Things to Watch out for This Week
1. Germany Balance of Trade
Confidence in the underlying health of the Eurozone’s powerhouse economy could take a blow on Thursday if August’s trade balance fails to show a widened surplus.
Unless Germany shows signs of weathering the general slowdown in global trade stemming from the Covid-19 crisis support for the Euro looks set to weaken.
2. UK Balance of Trade
Support for the Pound could also falter unless the UK balance of trade remains in a state of surplus in August.
With the issue of future trade with the EU still up in the air any evidence of trade having already weakened could weigh heavily on the GBP/EUR exchange rate.
3. UK Gross Domestic Product
A fresh bout of volatility looks set for GBP exchange rates on the back of Friday’s UK gross domestic product report, though.
Unless August’s growth data can demonstrate a solid uptick on the month worries over the possibility of a renewed economic slowdown could see the Pound fall out of favour once again.
GBP/EUR Outlook
If UK trade and GDP data fails to show signs of resilience fresh anxiety over the economic outlook could leave the GBP/EUR exchange rate biased to the downside.