The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week as a slew of positive UK data releases were undermined by concerns over the spread of the Indian variant of the coronavirus throughout the UK.
What’s Been Happening: Pound Undermined by Coronavirus Concerns
The Pound initially got off to a strong start last week, with the GBP/EUR exchange rate climbing to a five-week high in the first half of the session on the back of a surprising drop in domestic unemployment in March as well as optimism over the reopening of more of the UK economy.
However, Sterling then retreated again in mid-week trade, as concerns over the potential disruption to the government’s roadmap for reopening, due to the spread of the Indian variant of the coronavirus, overshadowed an upbeat inflation print.
While the GBP/EUR then rebounded on Friday on the back of some stellar retail sales and PMI figures, this upside proved short lived in the face of some Brexit concerns.
Meanwhile, the Euro garnered support throughout the first half of session as the EU’s accelerating vaccine rollout and lifting of more restrictions helped to bolster the Eurozone’s growth prospects.
But the single currency then faced some pressure at the end of the week as some dovish comments from European Central Bank (ECB) President Christine Lagarde, offset some upbeat PMI releases.
Three Things to Watch Out for This Week
- UK Coronavirus Developments
This week is seen as crucial in determining whether the threat posed by the Indian variant of the coronavirus could disrupt the UK government’s roadmap for reopening, and as a result any negative coronavirus developments could put some pressure on the Pound.
- Eurozone Economic Sentiment Index
Acting as a key catalyst for the Euro this week will be the Eurozone’s latest economic sentiment index, with another bump in morale likely to reflect positively on the single currency.
- German GDP
Also influencing EUR exchange rates this week will be the publication of Germany’s finalised GDP figures for the first quarter. Will a smaller-than-expected contraction in growth offer some support to the Euro at the start of the week?
Pound Euro Forecast
Looking ahead, the Pound Euro exchange rate could be infused with some volatility this week depending on UK coronavirus headlines.