The Pound Euro (GBP/EUR) exchange rate was volatile last week, as high-impact economic events and a shifting market mood caused turbulent trade.
So far in today’s session, GBP/EUR is already exhibiting some volatility. Could we be in for more wild movement from the Pound Euro pair this week?
What’s Been Happening: GBP/EUR Nosedives after BoE’s Dovish Hike
The Euro (EUR) initially strengthened against the Pound (GBP) last week as European markets grew more optimistic about the prospect of a peace deal between Russia and Ukraine.
However, a record slump in German investor morale hit the single currency on Tuesday. German economic sentiment tanked as the war in Ukraine threatens to push Europe’s largest economy into recession.
Meanwhile, after its initial dip, Sterling was able to zigzag higher against the Euro despite some mixed jobs data. The UK’s unemployment rate fell by more than expected, however this was in part due to a rise in economic inactivity.
GBP/EUR then plunged by 1% to a five-week low after the Bank of England (BoE) raised rates but cast doubt on the pace of further rate hikes.
On Friday, Sterling was able to attract some dip-buying, while the Euro ended the week on a sour note. The Eurozone’s latest balance of trade figures revealed a record trade deficit, allowing the Pound Euro pair to recover some of the week’s losses.
Three Things to Watch Out for This Week
- UK Inflation
After the BoE’s dovish forward guidance, some investors may be hoping for a hot inflation rate reading. If the UK CPI exceeds expectations, GBP could rise.
- UK Spring Budget
The spring budget is often less impactful than the autumn one. But, with the UK facing a cost-of-living crisis, this week’s announcement could cause some significant movement.
- Flash PMIs
The flash PMIs for this month are forecast to show slowdowns in both the UK and the Eurozone. Any surprises will likely have a big impact.
GBP/EUR Forecast
Alongside these three things to watch out for, we also have a handful of other high-impact data releases and news from the ongoing Russia-Ukraine war. Therefore, this week could bring more big swings in the GBP/EUR exchange rate.