ExchangeRates.org.uk - At time of writing the GBP/EUR exchange rate was trading at around €1.2008.It is virtually unchanged from last week’s opening rate but up roughly a cent from its worst levels.
The Pound (GBP) faced early headwinds last week, with GBP exchange rates stumbling as mounting concerns over the UK’s economic outlook weighed on investor sentiment.
The continued rise in price pressures and lingering uncertainty over the country’s growth prospects fuelled fears that the UK faces a period of stagflation.
Sterling sentiment improved later in the week, buoyed by a surprise uptick in UK GDP at the end of 2024.
While GBP investors welcomed the surprisingly positive growth figures, the Pound’s upside potential was tempered somewhat as the fairly meagre 0.1% expansion was not enough to offset wider concerns over the UK’s economic trajectory fully.
The Euro (EUR) got off to a shaky start last week following a warning from European Central Bank (ECB) Vice-President Luis de Guindos that US President Donald Trump’s tariff agenda will create greater economic uncertainty in the Eurozone.
Subsequent pullbacks in the US Dollar (USD) allowed the Euro to swiftly recover, thanks to the strong negative correlation between the two currencies.
After losing ground in mid-week trade due to ECB rate cut speculation, the euro found fresh momentum in the second half of the week amid growing optimism over the prospect of a peace deal to end the war in Ukraine.
Hopes that negotiations could end the prolonged conflict boosted EUR sentiment as investors speculated on the potential economic benefits of improved stability in the region.
An upwardly revised Eurozone GDP print supported these gains, with growth being revised up from 0% to 0.1% in Q4.
Looking to the week ahead, movement in the Pound Euro exchange rate may be primarily driven by some high-impact UK economic releases.
The highlight of these will no doubt be the UK’s latest jobs and inflation data, with both being closely watched for how they might influence Bank of England (BoE) monetary policy going forward.
If wage growth picks up or inflation continues to accelerate it may lead to a trimming of BoE rate cut bets.
Although stagflation concerns may undermine any upside in the Pound.
Meanwhile, EUR investors are likely to focus on the Eurozone’s latest PMI figures primarily.
Expect to see the Euro come under pressure if February’s preliminary figures point to a fresh slowdown in the bloc’s private sector.
This content was originally published on ExchangeRates.org.uk