The Pound appreciated against the Euro last week, with the GBP/EUR exchange rate climbing to almost €1.17 in the wake of a dovish European Central Bank (ECB) policy meeting.
Euro Plummets as Dovish Draghi Strikes Again
The Euro was the main mover and shaker last week, with the single currency facing heavy losses in the latter half of the week following the ECB’s March policy decision.
While the ECB made no changes to interest rates this month, it sent EUR sharply lower as it adopted a notably more dovish outlook for the coming year.
This included the bank slashing it economic forecasts as well as ECB President Mario Draghi surprising markets by announcing changes to the bank’s forward guidance to indicate that rates would remain on hold ‘through the end of 2019’ and offering new cheap loans to the Eurozone’s banks.
At the same time, while the Pound was able to close the week up against the Euro it did not come without its own hurdles, with Sterling struggling through the first half of the week as the UK’s latest PMI figures revealed UK firms cut jobs in February in the face of ongoing Brexit uncertainty.
Meanwhile the gains in GBP/EUR in the second half of the week were tempered by renewed Brexit pessimism, with investors shying away from the Pound as the UK was unable to secure legally binding changes to the Brexit agreement.
Volatile Week for the Pound as Brexit Vote in Spotlight
The main catalyst for movement in the GBP/EUR exchange rate for the coming week will undoubtedly be the House of Common meaningful vote on Theresa May’s Brexit deal, scheduled to take place on Tuesday.
This vote may then be followed by subsequent votes on a no-deal Brexit and extending Article 50 should the PM’s withdrawal deal be rejected, with the outcomes of each vote likely prompt some major movement in Sterling as they determine the next steps in Brexit.
Meanwhile the Euro could face some weakness at the start of the session with the release of Germany’s latest industrial data, with production potentially sliding in January in line with a contraction in factory orders over the same period.