The GBP/EUR exchange rate traded in a wide range this week as Brexit jitters and thin trading conditions over the New Year period prompted some erratic trade in the pairing.
Brexit Concerns Stoke Volatility in GBP/EUR
The Pound initially got off to a strong start this week, leaping over a cent to a two week high against the Euro on Tuesday.
This uptick in Sterling was partly attributed to end-of-year flows, but also the announcement from Boris Johnson that UK workers on minimum wage would receive a notable bump in wages in April.
It’s hoped the 6.2% rise in the national living wage, more than four times that of inflation, will bolster consumer spending and economic growth in 2020.
However the Pound then fell back again in the second half of the week, as the start of the New Year seemed to bring with it renewed concerns over Brexit, with GBP investors increasingly sceptical that the UK will be able to negotiate a trade deal with the EU in just eleven months.
Meanwhile, the Euro struggled to hold its ground against Sterling at the start of the week, with a lull in data and thin trade leaving the single currency mostly directionless.
The Euro was able to find some support in the latter half of the week however, thanks to some upbeat Eurozone data, with the bloc’s manufacturing PMI printing higher than expected in December.
Upbeat German Industrial Data to Buoy the Euro?
Looking ahead to next week’s session, the Pound to Euro exchange rate may come under some pressure with the publication of Germany’s latest industrial figures.
Economists forecast that both factory orders and industrial production will have rebounded in November, further fueling hopes that Germany’s economic slump may be coming to an end.
Also on the radar for EUR investors will be the Eurozone’s consumer price index, which is expected to show inflation in the bloc accelerated last month, although with the European Central Bank (ECB) still some way off its next rate hike any upside in the Euro may prove limited.
In the absence of any notable UK economic data the focus for GBP investors will remain firmly on Brexit.
This could see Sterling come under some pressure next week as the UK’s official exit from the EU on 31st January looms large.