GBP/EUR Weekly Forecast: Pound Euro Exchange Rate Slips as UK Recovery Stalls

The Pound Euro (GBP/EUR) exchange rate is trending lower this morning, as some better-than-expected unemployment data from Germany has given the Euro (EUR) a modest boost.

Meanwhile, worries over the UK’s economic recovery and rising Covid cases continue to weigh on Sterling.

What’s Been Happening: GBP/EUR Stumbles as UK Concerns Grow

The Euro fluctuated at the beginning of last week, as mixed German data and dovish comments from the European Central Bank (ECB) saw the single currency struggle to sustain its gains.

EUR managed to climb against GBP on Thursday, despite the Euro being dented by its strong negative correlation to a strengthening US Dollar (USD), with the Pound (GBP) under heavy selling pressure.

Friday saw the Euro slip, but it managed to hold on to most of the week’s gains.

Meanwhile, the Pound wavered during the first part of last week’s session, with mixed data and rising UK coronavirus cases worrying GBP investors.

These concerns grew, as UK supply chain disruption and a continued rise in Covid cases stoked fears that the UK economic recovery may be faltering.

While the Pound recouped some losses on Friday, GBP/EUR was still down from the week’s opening levels. A lack of data over the Bank Holiday Monday has seen Sterling slip slightly lower this week.

Three Things to Watch Out for This Week

  1. Eurozone CPI

Inflation in the Eurozone jumped to 3% in August – exceeding the expected 2.7% to print well above the ECB’s 2% target. Such a result could boost the Euro as the week unfolds, as it may put pressure on the ECB to reconsider its dovish stance.

  1. Finalised PMIs

Any revisions to last week’s flash figures could cause some movement in GBP/EUR, with the final manufacturing PMIs out on Wednesday and the services PMIs on Friday.

  1. UK Covid Cases

Rising UK Covid cases have weighed on the Pound on recent weeks. If infections continue to increase, the Pound could find itself struggling.

GBP/EUR Forecast

GBP/EUR could fall further this week due to a notable absence of UK economic data, especially if UK infections continue to climb.