Pound Euro Weekly Forecast: GBP/EUR Exchange Rate Wavers amid European Energy Crisis

The Pound Euro (GBP/EUR) exchange rate has tumbled today as Europe’s gas-crunch crisis is hitting the UK hard, though the surging price of gas has hurt both currencies over the past week.

What’s Been Happening: GBP/EUR Fluctuates during Volatile Week 

The Euro (EUR) wavered last week, slipping ahead of the US CPI release on Tuesday only to rally when inflation printed below expectations. 

The Euro then traded mostly sideways as better-than-expected industrial production figures and rumours of a possible rate hike in 2023 were offset by a stronger US Dollar and the worsening European gas crisis. 

Meanwhile, the Pound (GBP) was muted early in the week due to renewed Brexit concerns over the Northern Ireland protocol and checks on EU imports. 

A surge in UK inflation to 3.2% supported the Pound on Wednesday, but this was offset as prices were pushed up by low base effects.

Worries over the UK’s gas crunch pressured the Pound towards the end of the week, as did a surprise contraction in retail sales, keeping GBP/EUR in a narrow range.

Three Things to Watch Out for This Week 

  1. Markit Flash PMIs 

The flash PMIs for Germany, the UK and the Eurozone are out this week, with the results set to show slightly worse business activity in the UK, which may dent GBP. 

  1. BoE Interest Rate Decision 

With UK inflation at a nine-year high, some analysts may be hoping for the Bank of England (BoE) to begin tapering. However, recent poor UK data and economic worries may stay policymakers’ hands. 

  1. German Ifo Business Climate 

The business climate indiactro for Germany is expected to drop for a third consecutive month to its worst level since April. If so, this could weigh on the Euro. 

GBP/EUR Forecast 

If the Markit PMIs print as expected, the Euro could gain on the Pound this week. However, the BoE decision will be in the spotlight. Will the bank choose to taper, or a will a cautious decision dent GBP?