The Pound Euro (GBP/EUR) exchange rate rose from two-year lows over the past week. The currency pair saw volatile shifts amid waning confidence in the UK economy. The Bank of England’s (BoE) drastic intervention in the bond market helped to stabilise the pair.
What’s Been Happening: Pound Slumps as UK Mini Budget Continues to Weigh on Currency
The Pound (GBP) slumped sharply at the beginning of last week. Markets continued to react to the UK’s mini budget and the potential scale of government borrowing.
Sterling found some support on Wednesday however, after the BoE committed to stabilising the bond market. Additionally, better-than-forecast GDP figures helped to bolster the Pound.
The Euro (EUR) struggled to make gains despite a largely risk-off mood last week. The illegal annexation of four Ukrainian territories by Russia weighed on the single currency.
Energy supply concerns added to concerns of a recession for the trading bloc and weighed on EUR
Friday saw Eurozone inflation hit a record high of 10%, helping EUR to recover from earlier lows. The figures prompted further bets on interest rate hikes from the European Central Bank (ECB).
Weekly highlights
- ECB President Christine Lagarde Speech
Following last week’s red hot Eurozone inflation, investors will be looking to the central bank’s president for signals of further interest rate hikes. Will Lagarde hint at aggressive action from the ECB?
- Eurozone Retail Sales
Retail sales for Germany and the Eurozone are expected to slump drastically in August. Will the downturn add to recession fears and limit ECB rate hike bets?
- UK Economic Policy
Markets remain cautious over the UK’s poor economic outlook despite the government’s U-turn on some elements of their mini budget. Investors will be looking to PM Liz Truss and Chancellor Kwasi Kwarteng for any further comments.
GBP/EUR Forecast
The Pound could see losses on Wednesday if the final printing of the UK’s services PMI slips as predicted. For the Euro, a forecast widening of Germany’s trade surplus on Wednesday could help to underpin the single currency.