The GBP/EUR exchange rate was met by some dramatic swings over the past week as heightened Brexit jitters rocked the pairing.
Pound Rocked No-Deal Brexit Fears
The Pound to Euro exchange rate traded in a wide range last week as Brexit uncertainty continued to drive movement in the pairing.
This resulted in a sharp sell-off of Sterling in the first half of the week after both candidates in the Conservative leadership contest spoke out strongly against the Irish backstop.
This propelled GBP/EUR to a seven-month low on Tuesday as markets fear that that this will greatly increase the chances of a no-deal Brexit, due to the EU’s repeated refusal to negotiate a deal that does not include the backstop.
However the GBP/EUR exchange rate was able to bounce back in the second half of the week, with the Pound able to recoup the majority of its losses on Thursday thanks to a strong pick up in UK retail sales in June, which bolstered hopes the UK economy may have avoided a contraction in the second quarter.
Meanwhile despite the Euro’s gains against the Pound last week, it wasn’t all sunshine and rainbows for the single currency either, with the Euro struggling to find momentum in wider trade as economic sentiment in the Eurozone became remained gloomy in July.
More Volatility in Sterling Ahead?
Looking ahead to next week, we expect to see the Pound to Euro exchange rate to remain volatile throughout the session.
Whilst the conservative leadership election will finally come to a close next week, analysts suspect political uncertainty in the UK will remain heightened, with the threat of a possible general election by the end of summer likely to hang over the next Prime Minister.
Meanwhile, trade in the Euro may be equally chaotic as all eyes will be on the European Central Bank (ECB) latest policy meeting.
With the bank widely expected to introduce fresh stimulus measures by the end of the year the question for EUR investors whether this will be in the form of a rate cuts or the restarting of its quantitative easing programme.