Pound Euro Weekly Forecast: GBP/EUR Exchange Rate Rocked by Russian ‘Gas Blackmail’ 

The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week amidst fears European energy supplies could be disrupted.  

What’s Been Happening: Pound Euro Fluctuates on energy fears, UK economic concerns 

The Euro initially firmed last week in response to Emmanuel Macron’s victory in the French election, before quickly retreating again as the US dollar surged. 

Some hawkish comments from European Central Bank (ECB) policymaker Martins Kazaks briefly revived demand for the Euro. Until these gains were quashed by Russia’s move to halt gas exports to Poland and Bulgaria.  

This sparked concerns over the Eurozone’s energy security as the Kremlin warned other ‘unfriendly countries’ could be cut off. 

The single currency then continued to trade erratically into the end of the week after a weaker-than-expected Eurozone GDP print overshadowed another record surge in inflation in the bloc. 

Meanwhile the Pound also struggled last week, with Sterling being pressured as investors reined in their Bank of England (BoE) rate hike bets.   

Infusing further volatility into GBP exchange rates were concerns over the UK’s economy, after UK insolvencies were reported to have soared at the start of this year.   

Three Things to Watch Out for This Week 

  1. BoE Interest Rate Decision 

The focus this week will undoubtedly be on the BoE’s interest rate decision. With a modest rate hike priced in will we see some dovish forward guidance from the bank push the Pound lower? 

  1. German Industrial Data 

In terms of EUR data, the spotlight will be on Germany’s latest industrial releases, with an expected contraction in factory orders and industrial production likely to weigh on the Euro. 

  1. European Energy Security  

Heightened tensions between the EU and Russia could also act as a headwind for the single currency this week especially if EUR investors fear Moscow could widen its gas export ban to other countries like Germany. 

Pound Euro Forecast 

Looking ahead, the Pound Euro exchange rate could continue to trade erratically this week as a result of the BoE’s interest rate decision and ongoing concerns over Europe’s energy security.  

Matthew Andrews

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