The Pound to Euro (GBP/EUR) exchange rate traded in a wide range this week as the Eurozone’s latest GDP figures made for some grim reading.
Euro Undermined by Gloomy GDP Figures
Trade in the Euro was mixed this week as the Eurozone’s latest growth figures reveal the bloc contracted by a whopping 3.8% in the first quarter of 2020 as a result of the coronavirus crisis.
Also influencing EUR exchange rates was the European Central Bank (ECB), after ECB President Christine Lagarde warned the Eurozone economy could shrink by up to 12% this year.
However, it wasn’t all doom and gloom for the Euro, with the single currency catching some support after France and Spain unveiled plans to begin easing lockdown restrictions in the coming weeks.
Meanwhile, the Pound got off to a strong start this week, as GBP investors cheered Boris Johnson’s return to Downing Street.
But Sterling struggled to hold on to these gains in the mid-week, with renewed Brexit jitters weighing on GBP exchange rates on Wednesday.
The Pound then attempted to mount a comeback on Thursday after Boris Johnson announced the UK has passed the peak of its coronavirus outbreak, but these gains again proved temporary.
UK’s Lockdown Exit Strategy in Spotlight
Looking ahead to next week, the GBP/EUR exchange rate may be met by more volatility as Boris Johnson is set to publish a ‘comprehensive plan’ on how the government plans to reopen the economy.
Also, in the spotlight for GBP investors will be the Bank of England’s (BoE) latest interest rate decision.
While rates are widely expected to remain on hold next week, GBP investors will be looking to the BoE to provide guidance during these uncertain times, but predicting the scale of the economic damage from the coronavirus crisis will be no mean feat.
Further influencing the GBP/EUR exchange rate will be the finalised PMI figures from both the UK and Eurozone, which are expected to confirm private sector activity plummeted to record lows in April.
For EUR investors the focus will also be on Germany’s latest industrial data, with the Euro likely to face some headwinds depending on the extent of the contraction in Germany’s all important factory sector in March.