Pound Euro Exchange Rate Weekly Forecast: GBP/EUR Retreats from Four-Month High Following BoE Rate Decision

The Pound Euro (GBP/EUR) exchange rate briefly struck a new four-week high last week. Before falling sharply in the wake of the Bank of England’s (BoE) latest interest rate decision.

What’s Been Happening: Pound Euro Stumbles Following BoE Rate Decision

The Pound Euro exchange rate initially firmed this week. The Pound (GBP) being supported by BoE rate hike expectations and the Euro (EUR) facing lingering headwinds from the previous week’s European Central Bank (ECB) rate decision.

EUR exchange rates came under further pressure in the middle of the week as an ECB policymaker spook of the need to start cutting interest rates in 2024.

A kneejerk rection to the BoE’s rate decision propelled the GBP/EUR exchange rate to a new year-to-date. As the bank raised rates by 25bps and left the door open to further hikes.

However, the Pound almost immediately fell back, after BoE Governor Andrew Bailey suggested UK inflation will fall rapidly from April.

Closing out the week was the UK’s latest GDP figures. While month-on-month growth unexpectedly contracted in March, confirmation of a Q1 expansion was enough to underpin Sterling.

At the same time, the Euro’s negative correlation with the US Dollar (USD) resulted in the single currency stumbling over the finishing line.

Three Things to Watch out for This Week

  1. UK Jobs Report

The UK’s latest jobs report will be the focus for GBP investors this week. While unemployment is expected to remain unchanged, could an acceleration of wage growth bolster BoE rate expectations and lift the Pound?

  1. BoE Bailey Speech

GBP investors may also look to a speech by BoE’s Bailey for fresh impetus. If he reiterates the bank’s dovish monetary policy outlook Sterling could falter.

  1. German Economic Sentiment

In the spotlight for EUR investors will be Germany’s latest ZEW survey. Will deterioration in economic sentiment this month pull the Euro lower?

Pound Euro Outlook

In addition to the data mentioned above, the release of the Eurozone’s latest GDP and inflation releases could drive movement in the Pound Euro exchange rate, if there is any divergence from the preliminary readings.

Matthew Andrews

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