ExchangeRates.org.uk - GBP/EUR saw significant fluctuations last week, initially surging to a multi-year high before retreating as the Euro rebounded despite a dovish ECB rate cut.Meanwhile, the British Pound faced pressure from weak UK GDP data, reflecting a second consecutive month of economic contraction.
This week, market attention shifts to the Bank of England’s (BoE) upcoming rate decision and Eurozone PMI figures, both of which are likely to drive further movement in the pairing.
At time of writing GBP/EUR was trading at around €1.2017, a little lower compared to last week’s opening levels, roughly down 0.7% from its best levels of late.
The Euro (EUR) faced significant headwinds during the first half of last week, ahead of the ECB’s latest interest rate decision.
EUR investors were unwilling to take aggressive positions amid uncertainty surrounding the central bank’s monetary policy outlook.
However, the Euro then staged a recovery as the ECB concluded its final policy meeting of the year on Thursday.
This rebound in the single currency came despite the bank announcing another 25bps rate cut and also signalling that further monetary easing is likely to be needed in the new year.
This upswing in the Euro was made even more remarkable as ECB President Christine Lagarde also expressed concern over Eurozone economic growth in her accompanying press conference.
The Pound (GBP) found some support through the first half of last week’s session, buoyed by a positive market response to UK Chancellor Rachel Reeves’ pledge to tackle inefficiencies in government spending.
Sterling’s momentum faltered in mid-week trade amid the absence of any notable UK economic releases, with the currency struggling against most of it peers apart from the Euro.
GBP exchange rates then plummeted through the latter half of the week, driven in large part by the latest UK GDP figures.
October’s data reported an unexpected contraction in the UK economy for the second consecutive month, raising fresh concerns about the nation’s economic resilience
GBP/EUR Forecast: BoE Rate Decision in the Spotlight
Turning to this week, the Bank of England (BoE) will take centre stage as it delivers its final rate decision of the year.
With the BoE is widely expected to leave interest rates on hold this month, the bank’s forward guidance is likely to act as the main catalyst of movement for the Pound to Euro exchange rate.
If the bank signals it will maintain a cautious approach to further monetary easing, Sterling may strengthen.
In the meantime, the release of the Eurozone’s latest PMI figures will be in focus for EUR investors at the start of this week.
If December’s preliminary figures report the bloc’s private sector continues to contract, the euro may struggle.
This content was originally published on ExchangeRates.org.uk