The Pound Euro (GBP/EUR) exchange rate is currently trading at a one-month high, after the pairing rocketed higher last week amid Eurozone recession fears.
What’s Been Happening: GBP/EUR Exchange Rate Soars on Eurozone Recession Concerns
The Pound Euro exchange rate appreciated over two cents last week amid a clear EUR selling bias.
The Euro initially gave ground in response to Germany’s latest trade figures. May’s figures saw the country record its first trade deficit in 30 years.
However the bulk of the single currency’s losses came in the latter half of the week as a result of fears of an impending Eurozone recession.
This was triggered by a sharp spike in wholesale gas prices. Coupled with fears that Russia may soon cut gas exports to Europe in response to EU sanctions.
Movement in the Pound, meanwhile, was primarily driven by a turbulent 24 hours in UK politics. Which ultimately saw Boris Johnson resign as Prime Minister.
Johnson’s exit aided the ascent of the GBP/EUR exchange rate as it brought an end to weeks of uncertainty over the future of his premiership.
Sterling also benefitted from some hawkish comments from Bank of England (BoE) policymaker Catherine Mann. In which she called for central banks to be more aggressive in raising interest rates.
Three Things to Watch Out for This Week
- UK Politics
The Pound could face an uphill battle this week, as the relief over Johnson’s resignation begins to fade and the race to find his successor creates fresh political uncertainty.
- UK GDP
The UK’s latest GDP figures are expected to report growth stalled in May. This is likely to place pressure on Sterling as it will feed into fears that the UK economy may have contracted in the second quarter.
- German ZEW Index
The publication of the latest German ZEW economic sentiment index could weaken the Euro in the first half of the week. Investors forecast morale in the Eurozone’s largest economy will have plummeted this month.
GBP/EUR Forecast
The GBP/EUR exchange rate likely faces another week of volatile trade as concerns over European energy security show no sign of abating.