The Pound Euro (GBP/EUR) exchange rate has traded erratically over the past week as the pairing faces fresh concerns over the coronavirus pandemic.
What’s Been Happening: Pound Euro Fluctuates amid European Coronavirus Resurgence
The Euro spent much of last week on the back foot, with an initial drop coming as a result of German political uncertainty, after the ruling CDU party suffered a historic defeat in regional elections.
While EUR investors welcomed an upbeat economic sentiment reading from Germany on Tuesday, the Euro’s gains quickly evaporated after a number of European countries suspended use of the AstraZeneca vaccine, putting the brakes on the EU’s already sluggish vaccination programme.
The Euro then faced additional pressure in the latter half of the week, amidst signs that Europe is facing a third wave of coronavirus infections.
The Pound, meanwhile came under fire at the start of last week as the EU’s suspension of the AstraZeneca vaccine rattled GBP investors due to its wide use throughout the UK.
Sterling’s recovery was then cut short by the Bank of England (BoE), after GBP investors were disappointed that the bank wasn’t more hawkish in its forward guidance.
GBP exchange rates then gave ground again at the very end of the session amidst concerns a vaccine shortage could delay the UK’s lifting of coronavirus restrictions.
Three Things to Watch Out for This Week
- Coronavirus Developments
Coronavirus headlines could prove a major source of volatility in the Pound Euro exchange rate this week, amidst the threat of a third wave of cases in Europe as well as a row between the UK and EU over vaccines.
- UK Data
The UK will release a string of high-impact data this week, with the latest employment, inflation and PMI data releases likely to act as a key catalyst for Sterling.
- Eurozone PMI
For EUR investors the main focus data wise this week will be the Eurozone’s own PMI figures. Will a modest improvement in private sector activity be enough to temper the Euro’s coronavirus woes?
Pound Euro Forecast
The Pound Euro exchange rate is likely to be infused with considerable volatility this week as a result of multiple high profile UK data releases as well as concerns over a coronavirus resurgence in Europe.