The Pound Euro (GBP/EUR) exchange rate has fluctuated so far this week as European markets react to the latest escalation in Ukraine and further action from the Bank of England (BoE).
Looking to the week ahead, there could be some volatility in store.
What’s Been Happening: GBP/EUR Sheds Gains as Bond Markets Remain Volatile
The Euro (EUR) slipped at the start of last week’s trade. Russia-Ukraine worries and a poor manufacturing PMI weighed on EUR.
Through the rest of the week, European Central Bank (ECB) interest rate rise bets supported the single currency. Eurozone PPI exceeded forecasts while the latest ECB meeting minutes revealed an appetite for further rate hikes.
However, downbeat economic data and Russia fears limited the Euro’s gains.
Meanwhile the Pound (GBP) ticked higher on Monday. The government scrapped plans to cut the top rate of tax and the Bank of England’s (BoE) emergency bond-buying programme seemed to stabilise markets.
However, Sterling wavered lower through the rest of the week. Confusion over the publication date of the Treasury’s debt-cutting plans worried investors, and government bonds began selling off again.
In addition, Fitch Ratings downgraded the UK’s credit outlook from stable to negative, further troubling GBP traders.
Three Things to Watch Out for This Week
- UK Jobs Data
Economists will be using the latest jobs report to gauge the health of the UK labour market and whether inflation is feeding through into wage growth. Will a strong jobs print help bolster the Pound?
- UK GDP
Markets expect the UK economy to have contracted in August, which could weigh heavily on Sterling.
- Russia-Ukraine War
Some analysts are saying that the Crimean bridge attack and subsequent retaliations could signal a new stage in the Russia-Ukraine war. An escalation of the conflict would likely hurt the Euro more than the Pound.
GBP/EUR Forecast
This week, central bank speeches and UK politics could also drive significant movement in the GBP/EUR exchange rate. With so many influencing factors and a lot of uncertainty, the Pound Euro pair could be vulnerable to heightened volatility.