The Pound Euro (GBP/EUR) exchange rate rallied through last week’s session. Hawkish comments from Bank of England (BoE) policymakers allowed GBP/EUR to appreciate more than a cent.
Last Week: Pound Euro Rallies on Hawkish BoE Commentary
The Pound (GBP) enjoyed strong support against the Euro (EUR) last week. Sterling’s ascent being driven by some hawkish comments from BoE policymakers.
At the start of the week GBP Investors seized on comments from the BoE’s Catherine Mann. Mann warned the BoE may be forced to continue hiking interest rates in order to prevent high inflation from becoming entrenched.
The Pound remained on a positive trajectory as the National Institute for Economic and Social Research (NIESR), suggested the UK is ‘likely’ to avoid a recession in 2023.
BoE Governor Andrew Bailey’s suggestion the bank needs to ‘see more evidence of inflation pressures easing’, further reinforced Sterling gains in the latter half of the week.
The Euro, meanwhile, faced an uphill battle last week in response to some disappointing data. With both German industrial production and inflation printing below expectations.
The EUR selling bias was then reinforced by concerns over the war in Ukraine. A Russian missile came dangerously close to violating the airspace of NATO member Romania on Friday, stoking fears of an escalation of the conflict.
Three Things to Watch out for This Week
- UK Inflation
Economists forecast UK inflation will remain in double digits in January. Will a robust reading underpin BoE rate hike bets and boost the Pound?
- UK Jobs Report
Also in the spotlight for GBP investors will be the UK’s latest jobs report. Another strong wage growth print could strengthen Sterling sentiment.
- Ukraine Developments
Meanwhile EUR investors are likely to keep a close eye on Ukraine developments this week. The Euro could face headwinds amid reports Russia’s new offensive has begun.
Pound Euro Outlook
A slew of high-impact UK data, coupled with Ukraine uncertainty could infuse considerable volatility into the GBP/EUR exchange rate this week.