The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week, after Sterling reversed its initial gains in the wake of the Bank of England’s (BoE) latest policy meeting.
Last Week: Pound Undermined as BoE more Dovish than Expected
The Pound initially got off to a strong start last week, on the back of some economic optimism in the UK and better-than-expected PMI figures.
This uptrend was reinforced in mid-week trade after Nicola Sturgeon rebuffed claims her Scottish National Party might seek to hold an illegal independence referendum in the event it won a majority in Scotland’s parliamentary election.
However Sterling then stumbled through the latter half of the week after investors were left disappointed that the BoE’s move to begin tapering its weekly bond purchases didn’t go further.
The Euro, meanwhile, got off to a slow start last week amidst lingering concerns about the Eurozone’s double-dip recession.
However the single currency roared back to life in the second half of the week, rallying on the back of some positive industrial data from Germany as well as being buoyed by a sharp drop off in the US Dollar (USD).
Three Things to Watch out for This Week
- UK Reopening
Boris Johnson is set to confirm on Monday that the government will press ahead with plans to continue easing coronavirus restrictions this month, which has already helped the Pound Euro exchange rate get off to a solid start this week.
- UK GDP
Also set to influence GBP exchange rates this week will be the publication of the UK’s latest quarterly GDP release. Will a smaller-than-expected contraction of growth at the start of 2021 offer further support to Sterling?
- German Economic Sentiment
In focus for EUR investors this week will be the publication of Germany’s latest ZEW survey, with the Euro potentially getting a boost if it reveals that economic sentiment continued to strengthen this month.
GBP/EUR Outlook
Looking ahead, the publication of the UK’s latest GDP figures looks to be a key catalyst of movement in the Pound Euro exchange rate this week, as investors find how resilient the UK economy was to the latest lockdown.