The Pound to Euro (GBP/EUR) exchange rate struck higher last week, amidst relief the UK would not face a cliff-edge Brexit at the end of 2020.
What’s Been Happening: Brexit Relief Buoys Sterling
The Pound rallied against the Euro and the majority of its other peers through last week’s session, as markets expressed their relief that the UK and EU had reached a Brexit trade deal.
These gains were mostly focused in the second half of the week, after UK MPs overwhelming voted to approve the trade agreement on Wednesday.
However, it wasn’t all plain sailing for Sterling, with the UK currency facing some setbacks at the start of the week, as analysts raised concerns over the exclusion of the service sector from the new trade accord.
Meanwhile, news that the new, more infectious strain of the coronavirus had been detected in most parts of Europe put some pressure on the Euro last week.
Compounding these losses was some profit taking in the single currency, amid year-end thin trading conditions.
Three Things to Watch Out for This Week
1. Coronavirus Developments
Potentially acting as a key catalyst in the Pound this week will be the potential announcement of additional coronavirus restrictions in the UK, as Boris Johnson faces pressure to impose another national lockdown.
2. Eurozone Inflation
Likely driving movement in the Euro will be the publication of the Eurozone’s consumer price index. Will another month of deflation push the single currency lower this week?
3. German Industrial Figures
Also influencing EUR exchange rates will be the latest industrial releases from Germany, where a slowing of factory orders or industrial production in November is likely to stoke fears the Eurozone’s largest economy faces a double-dip recession this winter.
Looking ahead, expect to see the GBP/EUR exchange rate to face some pressure this week as the prospect of another national lockdown is likely to dampen demand for the Pound.