Pound to Euro Forecast: What Affected the GBP/EUR Exchange Rates This Week?

Pound to Euro Rate: GBP Continues to Gain Value Against the Euro

As trading slows down for the weekend, the pound and euro both saw significant shifts in direction over the course of the week. Sterling started the week off on the back foot following a late spike last week, with economic data releases returning better than expected results. But the currency saw a drop towards the start of this week as Brexit fears began to ramp up. With the confrontational manner that the EU and UK have set out in their mandates, investors have begun to worry over the future of a ‘no deal’ Brexit. Meanwhile, the euro rose amid a slump in both the USD and GBP. With the currency performing well despite coronavirus outbreaks in Italy, the single currency fared better than most rivals this week.

GBP starts week on back foot, with Brexit confrontations knocking it lower

The pound started the week on the back foot, falling 0.2% against the euro with the pair trading around €1.192 on the interbank exchange. Meanwhile, Brexit fears continued to escalate after the French finance minister noted that France would not bow down to the UK’s demands simply to meet the strict deadline set by Downing Street. The UK and EU have negotiated in somewhat of a confrontational manner causing volatility for GBP/EUR exchange rates. The GBP stuttered on Tuesday as the EU released their negotiation mandate which highlighted the guiding principle as being that the EU is looking to even the playing field by keeping the UK tied to the bloc’s regulations in exchange for a free-trade deal. This put further pressure on GBP investors as they knew that the UK was looking for the opposite conclusion.

UK mandate confirms investors biggest fear

Fears were confirmed on Thursday when the UK government released their own mandate which stated that the UK would not conform to EU laws post-Brexit, and threatened that should a deal not be negotiated by June, then the UK would leave the EU with no deal at all. This did more harm than good for GBP investors who may have concerns over the possibility of a ‘no deal’ Brexit becoming a reality, which has historically seen the GBP weaken against the euro.

Euro rises on GBP and USD weakness

As the pound faltered over the week, it allowed the euro to edge over it. Despite coronavirus outbreaks in Italy, the single currency has managed to fare better than most would have thought. Monday started off well for the euro, with the German IFO business climate index coming in positive. Towards the end of the week EUR investors were given optimism as Germany announced it will look to suspend its debt break provision in the German constitution to allow higher deficit spending in order to combat the country’s economic slowdown.

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