The Pound Euro (GBP/EUR) exchange rate traded in a wide range last week. GBP/EUR was rocked by bleak UK data in addition to Ukraine war fears.
What’s Been Happening: Pound Euro Plunged Following Abysmal PMI Figures
The Pound got off to a poor start last week, following the release of the UK’s latest PMIs.
Sterling plummeted as a sharper-than-expected contraction in the service sector saw UK private sector growth slow to a two-year low in January.
The GBP/EUR exchange rate then rebounded in the latter half of the week, with the Pound finding support from Bank of England (BoE) interest rate speculation.
The Euro, meanwhile, opened the week on positive footing, supported by the Eurozone’s own PMIs.
January’s preliminary figures surprised EUR investors by reporting the bloc’s private sector returned to growth for the first time in seven months.
Support for the Euro then waned in the second half of the week. EUR sentiment was undermined by fears of an escalation of the war in Ukraine. Russia warned that the West’s decision to supply Ukraine with modern tanks was tantamount to ‘direct involvement’ in the conflict.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
The primary focus for GBP investors this week will undoubtedly be the BoE’s latest interest rate decision. Will another 50bps hike be overshadowed by some dovish forward guidance and pull the Pound lower?
- ECB Interest Rate Decision
The ECB is also forecast to deliver a 50bps hike this week. If the ECB reiterates its will ‘stay the course’ with the current pace of rate hikes the Euro is likely to strengthen.
- Eurozone GDP
EUR exchange rates will also be influenced by the Eurozone’s latest GDP release. Will a contraction of growth in the last quarter of 2022 stoke Eurozone recession fears?
Pound Euro Forecast
A deluge of high-impact Eurozone data releases is likely to keep EUR investors on their feet this week. In addition to the releases noted above, the Eurozone’s latest inflation figures could also inject volatility into the Pound Euro exchange rate.