The Pound Euro (GBP/EUR) exchange rate strengthened last week amid some mixed trade as Sterling recovered from its post-Bank of England (BoE) slump.
So far today, the Euro (EUR) is up against the Pound (GBP). A drop in oil prices is relieving energy-cost fears in Europe while renewed Russia-Ukraine peace talks have reignited hopes of a diplomatic solution to the war in Ukraine. Both of these factors are supporting the single currency.
What’s Been Happening: GBP/EUR Wavers amid UK Cost-of-Living Crisis
The Euro fell through the first part of last week as Russia-Ukraine worries weighed on the single currency. With negotiations seemingly stalled and Russian aggression ongoing, EUR investors remained downbeat about the prospect of peace.
EUR then firmed against a weakening Pound. Better-than-expected PMI results boosted the Euro, as did news that the US and the EU have agreed on shipping more American gas to Europe.
However, the single currency slipped again at the end of the week following some poor German data. The Ifo business climate index for Germany slumped to a 14-month low, dragging EUR down.
Meanwhile, the Pound rose early in the week as traders shook off the dovish BoE decision from the previous week.
On Wednesday, cost-of-living fears hit GBP hard. UK inflation jumped to 6.2% – higher than forecast – while Rishi Sunak’s spring statement failed to cheer investors.
Sterling’s downside continued through to Friday, with an unexpected drop in retail sales adding to GBP’s woes. However, GBP/EUR was able to recover some losses and held most of its weekly gains.
Three Things to Watch Out for This Week
- BoE Bailey Speech
On Monday at noon, BoE Governor Andrew Bailey is due to speak. With the Ukraine crisis causing uncertainty, his comments could have a big impact on GBP.
- Eurozone Unemployment Rate
Economists expect the Eurozone unemployment rate to fall for the tenth consecutive month, which could boost the single currency.
- Eurozone Inflation
Inflation in the Eurozone is forecast to jump from 5.9% to a fresh record high of 6.5% on Friday. With soaring inflation stifling the bloc’s economic recovery, this could weigh on EUR.
GBP/EUR Forecast
There’s a lot of Eurozone data due out this week, some likely to be positive, some negative. In addition, the Russia-Ukraine war will likely continue driving movement. As such, we could see big swings in GBP/EUR.