The Pound to Euro (GBP/EUR) exchange rate opens this week in free-fall as the emergence of a new strain of coronavirus in the UK has panicked markets.
What’s Been Happening: Brexit Drama Stokes Volatility in the Pound
The Pound got off to a strong start last week as GBP investors were relieved to hear that the UK and EU agreed to extend talks past the weekend.
This uptrend in the GBP/EUR exchange rate was then extended through mid-week trade as reports suggested that a trade deal could be close.
However, the Pound faltered in the latter half of the session after Boris Johnson poured cold water on this optimism, after suggesting that a deal was unlikely without a ‘substantial’ shift from the EU on the remaining sticking points.
Meanwhile, the Euro stumbled out of the gates last week following the announcement of a ‘hard’ lockdown in Germany over Christmas and a tightening of restrictions in many other European countries.
But the single currency was able to claw back some of its losses through the second half of the week, as it was buoyed by broad weakness in the US dollar.
Three Things to Watch Out for This Week
1. Coronavirus Headlines
News of the emergence of a mutated and more viral Covid strain in the UK has taken a heavy toll on the Pound in initial trade this week, with a travel ban from its European neighbors and a freight ban from France stoking significant panic from GBP investors.
2. Brexit Developments
Likely stoking further volatility in Sterling this week will be the ongoing trade talks between the UK and EU. Hopes that a trade deal will be found are fading fast, with fears of a no-deal Brexit likely to pile even more pressure on the Pound.
3. Eurozone Consumer Confidence
In the absence of any other notable data releases the focus for EUR investors this week will be on the Eurozone’s latest consumer confidence index. Will an improvement in sentiment help to lift the Euro?
GBP/EUR Forecast
Looking ahead, expect to see the GBP/EUR exchange rate infused with significant volatility this week as Sterling sentiment looks to be gripped by fresh coronavirus panic and ongoing Brexit uncertainty.