The Pound to Euro (GBP/EUR) exchange rate is currently trading at a nine-month high, as Sterling continues to benefit from last week’s robust GDP release.
What’s Been Happening: Pound Bolstered by Strong GDP Print
The Pound moved broadly higher against the Euro through the first half of last week, as the UK’s success with its vaccination programme continued to underpin Sterling sentiment.
The Pound then faltered at the start of the second half of the week, after Bank of England Governor (BoE), Andrew Bailey warned the UK is at risk of being cut off from access to the EU’s financial markets.
However, Sterling roared back to life at the end of the session as the UK’s latest GDP release printed above expectations, with a 1% expansion of growth in the last quarter of 2020 likely to see the UK avoid a double-dip recession.
Meanwhile, the Euro’s negative correlation with the US Dollar offered support to the single currency through the first half of last week, amidst a pullback in the ‘Greenback’.
However, this support quickly evaporated amidst a modest rebound in USD at the end of the session, as EUR exchange rates also remained pressured by the EU’s vaccination failings.
Three Things to Watch Out for This Week
- PMI Releases
The publication of the UK’s and Eurozone’s latest PMI figures will be a key catalyst for the GBP/EUR exchange rate this week, with investors getting their first look at how economic activity fared on both sides of the Channel this month.
- UK Inflation
Also influencing the Pound this week will be the UK’s consumer price index, with Sterling potentially being knocked if inflation slowed as expected last month.
- German Economic Sentiment
In the meantime, the publication of the latest ZEW surveys could be a point of concern for EUR investors, as analysts forecasts economic sentiment in the Eurozone’s largest economy will deteriorated this month.
In addition to this week’s economic data, movement in the GBP/EUR exchange rate is also likely to be driven by coronavirus developments, with the Pound potentially finding support amidst speculation the UK will be in a position to start easing restrictions sooner rather than later.