The Pound Euro (GBP/EUR) exchange rate rallied last week. The pairing struck its best level since before Christmas after a volatile week of trade was capped off by a weak Eurozone inflation reading.
Last Week: Pound Euro Fluctuates at the Start of 2023
The Pound Euro exchange rate initially got off to a strong start last week. The single currency was undermined by its negative correlation with the US Dollar, in addition to a weaker-than-expected German consumer price index.
In the UK an upwardly revised manufacturing PMI, helped the Pound to capitalise on the Euro’s weakness.
The GBP/EUR exchange rate then peaked in the middle of the week. Concerns over the war in Ukraine offset an above-forecast Eurozone services PMI and kept the pressure on EUR.
Thursday saw Sterling falter following the release of the UK’s own services PMI. December’s finalised figures were revised to show a contraction.
However, the GBP/EUR exchange rate then rebounded sharply at the end of the week. The Eurozone’s CPI printed well below expectations. The sharp slump in Eurozone inflation at the end of 2022 was seen as relieving pressure on the European Central Bank (ECB) to continue raising interest rates.
Three Things to Watch out for This Week
- German GDP
Germany will publish its 2022 GDP report at the end of this week. Could a weaker-than-expected growth reading from the Eurozone’s largest economy place pressure on the Euro?
- UK GDP
The UK will also publish its latest GDP figures this week. November’s monthly release is expected to report a contraction in growth and is likely to weaken the Pound.
- Ukraine War
Reports suggest Russian President Vladimir Putin could mobilise upwards of 500,000 additional conscripts as early as this week. Another escalation of the conflict in Ukraine is likely to weigh on EUR exchange rates.
Pound Euro Outlook
Trade in the Pound Euro exchange rate may remain erratic this week. Lacklustre growth figures and the ongoing war in Ukraine likely infusing the pairing with additional volatility.