Pound To Euro Forecast For Week Ahead: Upbeat GBP/EUR Exchange Rate To Make Gains (2024)

The Pound Euro (GBP/EUR) exchange rate firmed last week following several upbeat UK data releases and continued political tensions within the Eurozone.

At the time of writing, the GBP/EUR exchange rate traded at around €1.1898, virtually unchanged from the start of Friday’s opening levels, however, traded at an almost two-year high.

The Pound (GBP) started the week supported by comments from the new UK Chancellor, Rachel Reeves.

Reeves delivered a speech during Labour’s first week in office, where she prioritised domestic economic growth, supporting Sterling sentiment at the start of the week.

Moving into the middle of the week, the Pound found further support following Bank of England (BoE) Chief Economist Huw Pill’s latest address.

Pill commented on the timing of UK interest rate cuts, explaining that it was an ‘open question’ whether the BoE was ready to cut interest rates, which served to underpin GBP exchange rates on Wednesday.

On Thursday, Sterling was buoyed by the UK’s latest GDP print. The Office for National Statistics (ONS) confirmed that the UK’s latest GDP reading beat forecasts, and came in at 0.4% in May, exceeding expectations of a more modest 0.2%

reading.

The week’s positive domestic data releases buoyed Sterling through to Friday in an otherwise data-light trading session.

Euro (EUR) Volatile amid French Political Jitters

The Euro (EUR) began the week struggling to garner investor attention, undermined by a lack of domestic data alongside continued political uncertainty in France.

Over the weekend, France held its second round of general elections, where left-wing alliance Nouveau Front Populaire (NFP) pushed Marine Le Pen’s Rassemblement National (RN) party into third place, behind President Macron’s centrist party.

Investors were initially relieved that the unsustainable fiscal policies proposed by the RN had not taken precedent.

However, with the odds of a hung parliament increasing, concerns over political gridlock in the Eurozone’s second largest economy served to significantly dampen EUR sentiment.

Holger Schmieding, an economist at Berenberg, an investment bank, commented: ‘The political forces that joined forces to prevent an RN government have little else in common. Their views on migration, social and cultural issues, fiscal policy and the need for pro-growth reforms are often diametrically opposed. Forming a government will not be easy. Times are tough, emotions are running high – and France has no tradition of forging coalitions between parties of very different political persuasions.’

On Thursday, the single currency failed to attract bids after Germany’s final consumer price index (CPI) confirmed a slowdown in inflation in June.

The Euro closed the week trading mostly flat as Eurozone data was once again in short supply, leaving the common currency directionless.

GBP/EUR Exchange Rate Forecast: ECB Interest Rate Decision in the Spotlight

Looking ahead, the primary catalyst of movement for the Pound Euro exchange rate this week will likely be the European Central

Bank (ECB)’s upcoming interest rate decision.

Scheduled for Thursday, the ECB’s interest rate decision could infuse significant volatility into EUR exchange rates should officials deliver a dovish consensus.

Before that, on Tuesday, Germany’s latest Zew Economic sentiment index is expected to show a slight downturn in July, but is still expected to remain near two-year highs, which could support the Euro.

On Wednesday, Eurozone headline inflation is expected to cool, which could ramp up rate cut bets just a day before the ECB’s interest rate meeting.

Turning to the Pound, Wednesday will see the publication of the UK’s own inflation data, and could also infuse volatility into the Pound should the data cool.

On Thursday, the UK’s latest unemployment rate is forecast to report that unemployment remained at 4.4%, and could see the Pound falter.

Looking at the end of the week, the UK’s latest retail sales print could underpin Sterling should the index report another strong figure for June.