The Pound Euro (GBP/EUR) exchange rate roared higher in the latter half of last week’s session, in response to a dovish European Central Bank (ECB).
What’s Been Happening: Pound Euro Rebound as ECB Still Not Ready to Hold Tapering Discussion
The Euro enjoyed some robust support though the first half of last week, with an upwardly revised first quarter GDP reading from the Eurozone helping to offset some lacklustre German data releases.
However, the single currency was forced to relinquish most of its gains against the Pound in the second half of the week, as the ECB concluded its latest policy meeting.
While the ECB’s decision to leave its monetary policy untouched was expected, EUR investors were still dismayed by President Christine Lagarde’s accompanying comments in which she claimed that it is still too early for the bank to start discussing its exit from its PEPP programme.
Meanwhile, the Pound faced some headwinds through the past week, in part due to growing speculation that the UK would need to delay its 21 June reopening date.
However, the majority of Sterling’s weakness was linked to renewed Brexit tensions between the UK and EU as the two sides failed to solve a dispute over the Northern Ireland protocol.
Three Things to Watch Out for This Week
- UK Reopening Delay
A key catalyst of movement in the GBP/EUR exchange rate this week will be the delaying of the UK’s 21 June reopening date, which is expected to be confirmed by Boris Johnson in a press conference on Monday.
- UK Economic Data
Also influencing the Pound will be a number of high-impact UK data releases. Will upbeat employment and inflation figures help Sterling to cap its losses from the reopening delay?
- Eurozone Inflation
The focus for EUR investors meanwhile, will be on the Eurozone’s own inflation release, which could lift the Euro if price growth is revised higher in May’s finalised figures.
Pound Euro Forecast
Looking ahead, the Pound Euro exchange rate may continue to trade in a wide range this week as the delaying of the UK’s reopening date looks set to infuse fresh volatility into Sterling.