The Pound Euro (GBP/EUR) exchange rate began today’s trade with some volatile movement – perhaps an indicator of what’s to come for the remainder of the week.
GBP/EUR dropped sharply before bouncing back and, at the time of writing, is trending higher. Economic and political uncertainty in the UK and the Eurozone continue to cause turbulence.
What’s Been Happening: GBP/EUR Wavers Lower in Volatile Trade
The Pound (GBP) experienced some volatility over the last week amid ongoing political uncertainty in the UK.
As the Conservative Party looks to elect a new leader, the future of UK policy – particularly fiscal policy – remains unclear.
UK GDP exceeded forecasts on Wednesday, with the UK economy unexpectedly growing by 0.5% in May. However, this only gave the Pound a temporary boost. GBP investors remained skittish about the political instability.
Meanwhile, the Euro (EUR) also faced some turbulence as its negative correlation to the shifting US Dollar (USD) saw the single currency rise and fall throughout the week.
Economic data added to the mixed movement. Economic sentiment in Germany slumped to a ten-year low on Tuesday, but better-than-forecast industrial production and balance of trade figures towards the end of the week helped the Euro gain against the weakening Pound.
Three Things to Watch Out for This Week
- UK Inflation Rate
Economists expect UK inflation to have edged higher last month. If it exceeds forecasts, as it has done many times this year, Sterling could strengthen.
- ECB Interest Rate Decision
With the European Cental Bank (ECB) set to begin raising interest rates, investors will be focusing on how aggressively the bank will move and how it plans to maintain financial stability in the Eurozone.
- UK Labour Market Report
If the UK’s labour market remains strong, this could support the Pound.
Pound Euro Forecast
In addition to the three events mentioned above, we have the flash PMIs, UK retail sales, and some other impactful releases. As a result, we could see some big swings in the Pound Euro pair as markets react and reposition.