The Pound to Euro (GBP/EUR) exchange rate fell back from a two-month high last week, in response to ongoing Brexit anxiety.
What’s Been Happening: Pound Undermined by Brexit Concerns
The Pound rocketed out of the gate last week, with the GBP/EUR exchange rate soaring to a two-month high following the news that a coronavirus vaccine, of which the UK government has pre-ordered 100 million doses, reported up to 90% efficacy.
But Sterling was unable to maintain these gains for long amidst renewed Brexit uncertainty, initially stemming from comments from European Commission president, Ursula von der Leyen, in which she cast some doubts on the possibility of a Brexit trade deal being signed.
This sell-off then accelerated at the end of the week, after Scottish National Party leader, Nicola Sturgeon, suggested that a second independence referendum should be held in the earlier part” of the next parliamentary term.
The Euro, meanwhile, opened the week on the defensive after the Eurozone’s latest PMI figures reported a larger-than-expected contraction in economic activity in November.
However, the single currency was ultimately able to end the week on a high, broad weakness in the US Dollar (USD) offset some lacklustre EUR data releases.
Three Things to Watch Out for This Week
1. Brexit Developments
It’s safe to assume that Brexit will remain in the spotlight for GBP investors this week, potentially leaving the Pound exposed to further losses if headlines remain broadly negative.
2. Coronavirus Developments
European coronavirus statistics as well as the possible approval of a coronavirus vaccine in the UK will eyed by markets this week, with the latter potentially offering some support to the GBP/EUR exchange rate.
3. Eurozone CPI
Across the channel the focus will be on the Eurozone’s latest consumer price index. Expect to see the Euro take a knock if the bloc remained in a state of deflation through November.
GBP/EUR Forecast
Looking ahead, with Brexit still acting as the main catalyst of movement we could be in for another choppy week of trade in the GBP/EUR exchange rate.