The Pound to Euro (GBP/EUR) exchange rate traded in a wide range last week, in response to some back and forth over the resumption of Brexit trade talks.
What’s Been Happening: Brexit Jitters Drive Volatility in the Pound
After a brief rally at the start of last week, the Pound found itself on the back foot through the first half of last week in response to renewed Brexit jitters, after Boris Johnson declared that Brexit trade talks with the EU were ‘over’.
This proclamation may have been a little premature however, as the EU’s Chief Negotiator, Michel Barnier was able to entice Johnson back to the negotiation table by suggesting the EU is ‘ready to discuss all subjects on basis of legal text’.
While the resumption of Brexit trade talks helped to catapult the GBP/EUR exchange rate to a six-week high in mid-week trade, the Pound failed to sustain its best levels amid some profit taking.
Meanwhile, trade in the Euro was also mixed last week, with the single currency fluctuating in response to the weakness of the US Dollar, coronavirus concerns, and the Eurozone’s latest PMI figures.
Three Things to Watch Out for This Week
1. Eurozone GDP
Top of the agenda this week will be the publication of the Eurozone’s latest GDP release. EUR investors will be eager to see how quickly economic growth in the bloc rebounded in the third quarter, but with the Eurozone now likely facing another contraction in Q4 any upside in the single currency may prove limited.
2. ECB Rate Decision
Also influencing EUR exchange rates this week will be the European Central Banks (ECB) latest rate decision. While no policy changes are expected from the ECB this month, some dovish forward guidance from the bank in light of the Eurozone’s coronavirus woes could put some pressure on the Euro.
3. Brexit Headlines
For GBP investors, it’s pretty safe to assume that the ongoing Brexit trade talks will be the main focus, with the Pound poised to rally on any reports of positive progress.
GBP/EUR Forecast
Looking ahead, with some high profile Eurozone data releases and Brexit keeping investors on their toes this week, its likely we will see the GBP/EUR exchange rate infused with fresh volatility.