The Pound Euro (GBP/EUR) exchange rate firmed through the first part of last week’s session, before plunging as trade came to a close. The long Easter weekend caused some volatility in the pair, with GBP/EUR now having recouped its losses from the end of last week.
What’s Been Happening: GBP/EUR Sheds BoE-Inspired Gains
The Pound (GBP) got off to a positive start last week amid rising expectations of at least one more interest rate rise from the Bank of England (BoE) at its meeting next month.
Meanwhile, the Euro (EUR) initially resisted steep losses thanks to hawkish comments from European Central Bank (ECB) policymakers. However, worries about a Russian retaliation to Finland’s NATO accession dented EUR.
Better-than-forecast German data throughout the week culminated in strong industrial production figures on Thursday, prompting a jump in the Euro.
GBP/EUR then slumped on Good Friday before bouncing back on Easter Monday amid some Easter weekend volatility. Hawkish rhetoric from the ECB’s Klaas Knot may have contributed somewhat to the movement.
Three Things to Watch Out for This Week
- UK GDP
Forecasters expect the UK’s latest GDP report to show that the British economy grew again in February, further reinforcing hopes that the country may avoid a recession. Such a result could support the Pound.
- BoE Speeches
BoE Governor Andrew Bailey, Chief Economist Huw Pill and external policymaker Silvana Tenreyro are due to speak this week. Could mostly hawkish signals provide the Pound with a boost?
- Eurozone Industrial Production
Market-moving Eurozone data is fairly thin this week, but the bloc’s latest industrial production results could prompt some activity. The single currency may strengthen if production accelerates, as expected.
GBP/EUR Forecast
This week could see Sterling climb higher against the Euro, if BoE policymakers remain hawkish and the UK economy shows continued growth. If the GDP report exceeds forecasts, as is did the previous month, the Pound could soar.
In the meantime, risk appetite and Russia-Ukraine news could infuse the pairing with volatility.