ExchangeRates.org.uk - At the time of writing, the GBP/EUR exchange rate was trading at around €1.1841.Down roughly 0.6% from last week’s opening levels.
The Pound (GBP) faced significant volatility last week, starting on the back foot as turmoil in the UK bond market rattled GBP investors.
A selloff in government bonds drove borrowing costs higher, with GBP investors growing increasingly uneasy about the potential implications for fiscal policy and economic growth.
Sterling found some relief mid-week following a surprise slowdown in UK inflation.
The unexpected easing of price pressures stoked bets for a Bank of England (BoE) interest rate cut in February, which helped to calm market nerves.
GBP exchange rates then came under fresh pressure in the latter half of the week on the back of lacklustre UK data.
Thursday saw the UK’s latest GDP figures report a meagre 0.1% expansion of growth in November, while Friday’s retail sales figures reported sales growth unexpectedly contracted at the end of 2024.
Euro (EUR) Undermined by USD Strength
While the Euro (EUR) rose against the Pound last week, it struggled to replicate this success against many of its other peers.
This was particularly notable at the start of the week as the single currency was pressured by its strong negative correlation with the US Dollar (USD), which sorted to new multi-month highs on Monday.
A subsequent pullback in USD provided some relief for EUR exchange rates, although the Euro’s upside potential was capped by data showing that Germany’s economy contracted for the second consecutive year in 2024.
Adding to the euro’s woes, were some dovish comments by European Central Bank (ECB) policymakers sprinkled throughout the session.
GBP/EUR Forecast: Sterling to Test New Lows as UK Labour Market Slows?
Turning to this week, the Pound Euro exchange rate may come under fresh pressure with the release of the UK’s latest jobs report.
Additional signs that the UK labour market continued to soften through the end of 2024 is likely to compound concerns over the UK’s fiscal health and reinforce bets for a BoE rate cut next month.
Meanwhile, EUR investors will be keeping a close eye on the Eurozone’s latest PMI figures, with the Euro poised to sink if the bloc’s private sector continues to contract this month.
This content was originally published on ExchangeRates.org.uk