The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week, fluctuating by two cents and rebounding from a 12-day low. The volatility came amid high-impact economic and political events.
What’s Been Happening: GBP/EUR Bounces off 12-Day Low
The Euro (EUR) strengthened early in the week thanks to a blog post from European Central Bank (ECB) President Christine Lagarde. In her post, Lagarde signalled that the ECB would hike rates in July and September.
However, the latest German consumer confidence showed that morale in Europe’s largest economy remains near a record low. This trimmed EUR’s gains somewhat.
Thin trading conditions towards the end of the week left the single currency without a clear direction.
Meanwhile, Sterling slumped on Tuesday after the UK’s PMIs showed a sharp slowdown in service-sector activity.
The Pound (GBP) then managed to regain most of these losses, despite the publication of the ‘partygate’ report. Although the report was damning, Boris Johnson looks as though he may survive the scandal.
Chancellor Rishi Sunak’s cost-of-living support package may have helped GBP. Sunak announced a £15bn spending plan to help households struggling with rising costs, which will hopefully stave off a recession.
Three Things to Watch Out for This Week
- Eurozone Flash CPI
Economists expect inflation in the Euro area to have jumped from 7.4% to 7.7% this month. Such a rise could boost EUR ahead of the ECB’s rate decision next week.
- Eurozone Unemployment Rate
The Eurozone unemployment rate is forecast to fall from 6.8% to 6.7%, which would likely support EUR.
- UK Politics
Amid a lack of market-moving UK data this week, UK political news could influence the Pound. Is ‘partygate’ now behind us, or will Johnson face fresh pressure to resign?
Pound Euro Forecast
Trading conditions for the Pound may be thin this week, with very little data ahead of the four-day Platinum Jubilee. Meanwhile, the Euro could be set for some strong data releases that may boost ECB rate rise bets. Therefore, we could see the Pound Euro pair lose ground this week.