The Pound Euro (GBP/EUR) exchange rate is ticking higher this morning, although gains seem limited, as both currencies lack any significant support.
What’s Been Happening: GBP/EUR Swings by Over 1%
The Pound Euro pair experienced some volatility last week, fluctuating between a 13-day high of €1.1679 and a 16-day low of €1.1526.
Early in the week, GBP/EUR headed lower as concerns about the Northern Ireland Protocol Bill hurt the Pound (GBP).
Meanwhile, the Euro’s (EUR) negative correlation to a stronger US Dollar (USD) capped the single currency’s gains.
Trade grew choppy midweek. A policy panel discussion with the heads of the Eurozone, US and UK central banks sparked activity in the market. Cautious comments from Bank of England (BoE) Governor Andrew Bailey and European Central Bank (ECB) President Christine Lagarde weighed on the respective currencies.
EUR investors also grew more concerned about fragmentation in the Eurozone. As the ECB raises rates, it could cause financial instability across the different countries within the bloc.
On Thursday, details about the ECB’s new anti-fragmentation tool emerged. This boosted the Euro, allowing it to regain losses against the Pound.
The Pound Euro rate then plunged on Friday as Eurozone inflation beat forecasts and UK data came in below expectations. However, Sterling managed to claw back its losses as a stronger US Dollar dragged EUR down.
Three Things to Watch Out for This Week
- Central Bank Speakers
A number of BoE and ECB policymakers are due to speak this week. Any hints at future monetary policy could impact the Pound Euro pair.
- Final Services PMIs
Both the Eurozone’s and UK’s final services PMIs are out on Tuesday. Could the UK’s score be revised lower? If so, GBP will likely slip.
- ECB Meeting Accounts
The minutes from the ECB’s last policy meeting could affect EUR. Investors will be trying to gauge the ECB’s approach to interest rates and fragmentation.
Pound Euro Forecast
This week brings a number of uncertainties and potentially impactful events, so the Pound Euro pair could see more volatility.