ExchangeRates.org.uk - At the time of writing, GBP/EUR was trading at around €1.2064, up 0.2% from last week’s opening levels.The Euro (EUR) came under notable selling pressure last week, amid French political turbulence.
This began with the tabling of a no-confidence vote in Prime Minister Michel Barnier after he used special constitutional powers to push a budget through the deeply divided National Assembly.
The French government subsequently collapsed as Barnier lost the no-confidence vote, plunging the Eurozone’s second-largest economy into political turmoil.
Adding to the euro’s woes were a series of dovish comments from European Central Bank (ECB) policymakers.
These remarks cemented bets for a December interest rate cut and stoked speculation the ECB may maintain a cautious approach to monetary policy in the coming months.
The Pound (GBP) faced a rocky start last week, after the UK’s latest manufacturing PMI was unexpectedly revised lower.
Sterling sentiment remained downbeat on Tuesday as the British Retail Consortium reported a slowdown in UK consumer activity in November.
GBP exchange rates then firmed in midweek trade, supported by an upward revision to the UK’s services PMI, which allowed the private sector to avoid contraction last month.
A broadly positive response to Prime Minister Keir Starmer’s speech outlining a series of ‘milestones’ for the UK government then helped underpin Sterling sentiment through the second half of the week as he outlined plans to push through several major economic infrastructure projects over the next few years.
GBP/EUR Exchange Rate Forecast: Dovish ECB Interest Rate Cut to Sink the Euro?
Turning to this week, we may see the Pound to Euro exchange rate maintain a positive trajectory as the ECB delivers its latest interest rate decision.
In addition to a widely expected 25bps rate cut, EUR investors will be paying close attention to the bank’s forward guidance.
If the bank hints it will continue to ease its monetary policy through the start of 2025, the Euro is likely to nosedive.
Meanwhile, the focus for GBP investors this week will be the UK’s latest GDP figures.
If economic growth continued to contract, the Pound could face headwinds later in the session.
This content was originally published on ExchangeRates.org.uk