Pound Euro Weekly Forecast: GBP/EUR Exchange Rate to Fall on Eurozone Data?

The Pound Euro (GBP/EUR) exchange rate fell over the course of last week as simmering Brexit tensions put pressure on the Pound (GBP) and the emergence of the Omicron variant boosted the Euro (EUR). 

What’s Been Happening: GBP/EUR Drops to 11-Day Low amid Bitter Brexit Rows 

The Euro firmed early last week after the Eurozone’s flash PMIs unexpectedly increased, indicating a faster pace of growth in both the manufacturing and services sectors. 

The single currency then wavered amid rising Covid cases in the Euro area. However, slightly more hawkish comments from the European Central Bank (ECB) helped the Euro edge higher against the Pound. 

Friday then saw the Euro surge. The new Omicron variant dented global rate hike expectations, which meant the ECB’s dovish stance became far less of a headwind for the single currency. 

Meanwhile, the Pound faced downward pressure despite better-than-expected PMI results. Brexit negotiations over the Northern Ireland protocol seemed to have stalled while the Anglo-French fishing dispute dragged on. 

These issues weighed on GBP through the week, despite a surge in the Confederation of British Industry (CBI) industrial trends orders index. 

GBP/EUR then fell to an 11-day low on Friday as Brexit tensions escalated. French fishers mounted protests against the UK’s fishing licence stance, while the French government disinvited Priti Patel to a meeting about the Channel boat crisis. 

Three Things to Watch Out for This Week 

  1. BoE Speeches  

With little UK data on the calendar this week, speeches from some Bank of England (BoE) officials may trigger notable movement in GBP. 

  1. Finalised PMIs 

The final PMIs for both the UK and the Eurozone could affect GBP/EUR if the scores are revised. 

  1. Eurozone Unemployment 

Economists expect the unemployment rate in the Euro area to fall from 7.4% to 7.3%. This could boost the single currency. 

GBP/EUR Forecast 

With more Eurozone data than UK data this week, and much of it set to be positive, GBP/EUR could soften. However, if BoE policymakers strike a hawkish tone then Sterling may show some resilience. 

Samuel Birnie

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