The Pound Euro (GBP/EUR) exchange rate dropped from a three-month high last week but managed to recoup some of its losses as the week went on.
Although UK GDP exceeded forecasts this morning, GBP/EUR is wobbling lower.
What’s Been Happening: GBP/EUR Declines amid Lack of UK Data
GBP/EUR slumped at the start of last week’s trade as a souring market mood pushed the riskier Pound (GBP) lower against the safer Euro (EUR). In addition, hawkish comments from some European Central Bank (ECB) officials lent the common currency support.
Above-forecast German and Eurozone economic data added to EUR’s upside as the week went on. However, worrying comments from Russian President Vladimir Putin trimmed the Euro’s gains on Wednesday.
Meanwhile, upbeat news about easing food inflation and a new UK-US gas deal limited Sterling’s losses.
GBP/EUR regained some ground at the end of the week. An improving market mood lifted the Pound, along with the UK government’s plans to boost the country’s financial services industry through deregulation.
The single currency suffered as traders remained downbeat about the Russia-Ukraine war.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
The Bank of England (BoE) decision is the key event for GBP this week. If the bank seems more hopeful about the UK economy following the Autumn Statement, Sterling could rise. However, divided opinions among policymakers and recession fears could hurt the Pound.
- ECB Interest Rate Decision
The ECB also has its interest rate decision this week. A dovish tilt from the central bank could weigh heavily on the Euro.
- Flash PMIs
On Friday, the latest flash PMIs for both the UK and the Eurozone are out. Forecasters expect business activity in the UK to show a deeper contraction, which could dent GBP.
GBP/EUR Forecast
While the central bank decisions are the focus, UK jobs data and inflation could cause movement in the meantime. Overall, this week could bring significant volatility in the Pound Euro exchange rate.