The Pound Euro (GBP/EUR) exchange rate fell to a ten-day low last week as UK economic and political headwinds continued to pressure the Pound (GBP).
What’s Been Happening: GBP/EUR Falls to Ten-Day Low
The Euro (EUR) strengthened early last week, despite a low economic sentiment reading for the Eurozone, after German and Spanish inflation figures exceeded forecasts.
EUR faced some pressure as the week went on, with Eurozone energy insecurity worrying EUR investors. However, the single currency still rose against a weakening Pound.
The Euro then jumped even higher on Friday, despite a surprise contraction in Eurozone retail sales, amid a weaker US Dollar (USD).
Meanwhile, the Pound fell on Monday after the Federation of Small Businesses (FSB) warned that half a million small firms face going bust in a matter of weeks.
The economic headwinds persisted. Lending data suggests that households are taking on more debt amid the cost-of-living crisis, while UK economic confidence slumped.
With the Platinum Jubilee thinning trading conditions, these issues continued to hurt Sterling. In addition, the increasing likelihood of a no confidence vote in Boris Johnson may have weighed on GBP.
Three Things to Watch Out for This Week
- Boris Johnson No Confidence Vote
The UK Prime Minister faces a no confidence vote on Monday evening. In the unlikely, though not impossible, event that he is ousted, Sterling may fall further. If Johnson wins, it could resolve the political uncertainty that has hurt the Pound and boost GBP.
- ECB Decision
The European Central Bank (ECB) will decide on monetary policy this week. Investors expect a firmer signal that the bank will start raising rates in July, which may boost EUR.
- Russia-Ukraine Crisis
EUR investors are worried that further energy insecurity caused by the conflict could keep hurting the Eurozone economy. Any negative headlines could therefore dent the single currency.
GBP/EUR Forecast
The Pound Euro pair could face some big swings this week with two potentially high-impact events. Therefore, it may be best to be prepared for possible volatility.