The Pound to Euro (GBP/EUR) exchange rate firmed last week, following a mostly positive reaction to the UK’s 2021 Budget.
What’s Been Happening: Pound Strengthens as Budget Boosts Recovery Hopes
The Pound rallied against the Euro last week, as Sterling rode higher on the back of UK economic optimism.
This optimism was in large part driven by Chancellor Rishi Sunak’s 2021 Budget statement, which received a broadly positive response from investors, in spite of some concerns over the inclusion of a future hike in corporation tax.
Meanwhile, the Euro struggled to attract support this week, as it was undermined by its negative correlation with the US Dollar (USD), following a sharp appreciation of US Treasury yields.
Also compromising the single currency were some lacklustre EUR data releases, most notably the Eurozone’s latest retail sales figures, which reported sales growth in the bloc plunged 5.9% at the start of 2021.
Three Things to Watch Out for This Week
- ECB Rate Decision
The European Central Bank will hold its latest policy meeting this week. While no policy changes are expected from the bank this month, EUR investors will be keeping a close eye on the ECB’s forward guidance for any signals as to how the bank may shape future monetary policy.
- UK GDP
In the spotlight for GBP investors this week will be the publication of the UK’s latest GDP figures, with the Pound potentially facing some headwinds depending on the size of the country’s economic contraction in January.
- UK Coronavirus Statistics
Also influencing Sterling sentiment this week will be the latest UK coronavirus statistics. Recent data has shown signs that the decline in new cases is slowing, and concerns this could lead to delays to reopening the UK economy could weigh on the Pound.
GBP/EUR Forecast
The GBP/EUR exchange rate looks set to trade in a wide range this week as the ECB and the UK’s GDP figures are likely to infuse fresh volatility into the pairing.