The Pound to Euro (GBP/EUR) exchange rate struck higher last week following the announcement of lockdowns in France and Germany. But with the UK now facing its own nationwide lockdown these gains look vulnerable.
Last Week: Euro Scarred by New Lockdown Measures
The Euro came under significant pressure last week, as an alarming rise in coronavirus cases across Europe weighed heavily on EUR sentiment.
This came to a head on Wednesday, as France and Germany to implement new lockdown measures, after Europe’s two largest economies reported record increases in cases.
Extend the EUR selloff were comments from European Central Bank (ECB) President, Christine Lagarde, who warned that risks to the Eurozone’s economy are tilted to the downside, and that the bloc faces ‘very negative’ growth in November.
At the same time, the Pound was able to capitalise on the Euro’s weakness through most of the week, finding support from some cautious Brexit optimism on reports of some positive progress in trade talks.
However the GBP/EUR exchange rate was unable to hold at its best levels, with the Pound retreating ahead of the weekend amidst speculation the UK was set to follow its European neighbours into lockdown.
Three Things to Watch out for This Week
1. Coronavirus Developments
With the UK set to join its European neighbours in lockdown this week, it’s likely we could see some unwinding of the Pound. With the Euro also vulnerable to additional losses as more countries in the Eurozone tighten restrictions.
2. BoE Rate Decision
Also set to influence the Pound this week will be the Bank of England’s (BoE) latest policy meeting, in which the BoE is widely expected to inject fresh round of stimulus in to the UK economy.
3. German Industrial Data
In focus for EUR investors this week will be the publication of Germany’s latest industrial production and factory order figures, with the Euro potentially facing additional pressure if Germany’s vital industrial sector showed signs of slowing in September.
GBP/EUR Outlook
As coronavirus headlines are set to dominate markets again this week, it seems safe to assume we will the GBP/EUR exchange rate infused with fresh volatility.