The Pound Euro (GBP/EUR) exchange rate tumbled from a one-year high to a six-week low last week, as Sterling succumbed to some significant profit taking.
What’s Been Happening: Pound Euro Plunges from One-Year High
The Pound initially got off to a strong start last week, with the GBP/EUR exchange rate being carried to a one-year high as the UK government confirmed it would be going ahead with plans to reopen large parts of the economy from 12 April.
However, Sterling was unable to sustain these gains for long, with the currency falling victim to some profit taking as well as concerns about disruption to the UK’s vaccination programme.
Also exerting pressure on the Pound last week was a wave of violence which erupted in Northern Ireland, amidst tensions over the Irish sea border imposed as part of the UK’s Brexit trade agreement with the EU.
Meanwhile, the Euro was supported through much of last week amidst signs that the EU’s vaccine rollout has finally started to accelerate, with a pullback in the US Dollar also proving supportive of the single currency.
However these gains were tempered later in the week after some disappointing German industrial data.
Three Things to Watch Out for This Week
- Coronavirus Developments
Continuing to act as a key catalyst of movement in the Pound Euro exchange rate this week will be coronavirus headlines from both sides of the Channel. As the UK prepares to reopen a large part of its economy, rising cases could force more of Europe into lockdown.
- UK GDP
Also influencing Sterling sentiment this week will be the UK’s latest monthly GDP figures, with an expected rebound in growth in February likely to be supportive of GBP exchange rates.
- German Economic Sentiment
In focus for EUR investors at the start of this week will be the publication of the latest ZEW surveys. Will economic sentiment in Germany have continued to improve this month and help to bolster the Euro?
Pound Euro Forecast
The Pound Euro exchange rate looks well positioned to mount a recovery this week, amidst the contrast between the reopening of the UK economy and growing calls for further lockdowns on the continent.