While the GBP/EUR exchange rate was able to appreciate this week, the pairing’s faced a number of hurdles stemming from the ongoing uncertainty surrounding Brexit.
Upside in Sterling Capped by Brexit Uncertainty
After a rocky start to the week, with the Pound losing ground due to thin trading over the long Easter weekend, Sterling sought to rally on Tuesday as the return of Parliament following the break brought with it a sense of optimism regarding Brexit.
However this proved fleeting, with Sterling only able to make any lasting gains against the Euro on Wednesday after the UK budget deficit was reported to have fallen to a 17-year low over the last financial year.
While the Pound then spent the second half of the session appreciating against the Euro, the upside to GBP/EUR was capped by renewed Brexit uncertainty.
Meanwhile, after a strong start to the week thanks to some thin trade in some of its peers, the Euro still found itself closing the session lower.
The fall back in EUR was initially triggered on Wednesday after a weak IFO survey from Germany revealed firms grew increasingly pessimistic in April.
This weakness in the Euro then persisted through the second half of the week as investors shied away from the single currency ahead of the Spanish General election taking place over the weekend.
Euro to Slide as Eurozone GDP Slows?
In the spotlight next week, and potentially driving the Pound to Euro exchange higher will be the Eurozone’s latest GDP print.
Following a run of gloomy Eurozone data since the start of 2019, it looks likely that growth in the bloc will have slowed from 0.2% to 0.1% in the first quarter, an outcome that could drive some heavy losses in the Euro next week.
Meanwhile, barring any notable Brexit headlines, the focus for GBP investors will likely be on the Bank of England’s upcoming rate decision.
While no policy changes are expected from the BoE next week as Brexit uncertainty continues to limit the bank’s options, we may still see the Pound find some modest gains if policymakers appear more upbeat in the their economic outlook for 2019 in light of recent UK data.