The Pound Euro (GBP/EUR) exchange rate fell sharply last week, with the pairing slumping to a new one-month low in the wake of the Bank of England’s (BoE) latest interest rate decision.
What’s Been Happening: GBP/EUR Plummets as BoE Leaves Interest Rates on Hold
The Pound (GBP) got off to a fairly poor start last week, with the currency being undermined by Brexit tensions as the UK and France continued to clash over fishing rights.
While Sterling began to firm again in mid-week trade after the UK’s latest services PMI was revised higher, these gains proved short-lived, with the GBP/EUR exchange rate plunging again on Thursday in the wake of the BoE’s interest rate decision.
GBP investors were left disappointed by the BoE’s decision to leave rates on hold in November, with accusations that Governor Andrew Bailey may be another ‘unreliable boyfriend’, after he previously signalled that the bank ‘will have to act’ to curb inflation.
Meanwhile, despite some underwhelming German retail and industrial data, the Euro (EUR) was still able to accelerate against the Pound last week, with the single currency drawing some support at the end of the session following a pullback in the US Dollar (USD)
Three Things to Watch Out for This Week
- UK GDP
The spotlight this week will be on the publication of the UK’s latest GDP figures. Their release could place some pressure on the pound as economists forecast domestic growth slowed in the third quarter.
- Brexit Developments
Also likely to influence Sterling sentiment will be the ongoing uncertainty surrounding Brexit, with GBP exchange rates likely to falter if the row over fishing rights continues to escalate.
- German Economic Sentiment
For EUR investors the focus will be on the publication of Germany’s latest economic sentiment index, with the Euro likely to face some headwinds if sentiment continued to deteriorate this month.
GBP/EUR Forecast
Looking ahead, movement in the GBP/EUR exchange rate may remain volatile this week in the face of ongoing Brexit concerns and the release of some high impact data releases.