ExchangeRates.org.uk - GBP/EUR traded with notable volatility last week, with the pairing soaring to new multi-month highs, before almost immediately plummeting back to earth.At time of writing GBP/EUR was trading at around €1.2036.
Virtually unchanged from last week’s opening levels, but down 1% from the pairing’s best levels.
The Pound (GBP) got off to a strong start last week, bolstered by the release of stronger-than-expected UK PMI and employment data.
The surprisingly strong uptick in UK service sector activity, coupled with an acceleration in wage growth suggested the UK economy remains more resilient than previously feared.
GBP exchange rates then faced some resistance in mid-week trade with the publication of the UK’s latest consumer price index.
Despite another acceleration in inflation erasing any lingering bets that the Bank of England (BoE) may cut interest rates following its December policy meeting.
Sterling sentiment then soured dramatically in the second half of the half of the week as the BoE concluded its final policy meeting of the year.
While the BoE kept interest rates on hold this year, three of the nine members of the bank’s Monetary Policy Committee voted for a cut.
Coupled with the downgrading of the bank’s growth forecasts, this saw GBP/EUR shed almost the entirety of its gains from the start of the week.
The Euro (EUR) got off to a shaky start last week in response to some mixed PMI figures.
While the Eurozone’s services sector unexpectedly returned to growth this month, ongoing weakness in manufacturing lead to another contraction in the private sector as a whole.
The single currency then faced notable pressure in mid-week trade as it was undermined by its strong negative correlation with the US Dollar (USD), which soared on the back of hawkish forward guidance from the Federal Reserve.
EUR exchange rates then clawed back some of these losses the latter half of the week, aided by a stronger-than-expected improvement in German consumer confidence.
GBP/EUR Forecast: Liquidity Expected to be Limited over the Holiday Period
Turning to this week, movement in the Pound to Euro exchange rate is likely to be limited amid a lull in notable data and holiday-thinned trade.
However, the pairing may still be influenced by wider market trends, with the euro in particularly vulnerable to losses if the US Dollar extends its Santa rally.
This content was originally published on ExchangeRates.org.uk