GBP/EUR exchange rate fluctuates as ECB expands stimulus programme by €600bn

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he Pound to Euro (GBP/EUR) exchange rate traded in a wide range this week as the European Central Bank (ECB) announced an expansion to its Pandemic Emergency Purchase Programme (PEPP). 

Euro Bolstered as ECB Tops Up its PEPP Scheme 

The Euro initially got off to a poor start this week, on the back of a weaker-than-expected manufacturing PMI from the Eurozone. 

While the single currency was able to stave off further losses against the Pound through the mid-week, it would take the ECB’s latest policy announcement on Thursday to help the Euro claw back some ground. 

This saw EUR exchange rates jump as the ECB announced it would be expanding its PEPP scheme by an additional €600bn, allowing its bond purchases to run through to 2021. 

Meanwhile, the Pound ticked higher at the start of the week, buoyed by an upbeat market mood and a stronger-than-expected manufacturing PMI. 

However Sterling would find itself running out of steam and later relinquishing these gains amidst renewed Brexit uncertainty. 

This came as Bank of England (BoE) Governor Andrew Bailey reportedly told banks to step up their preparations for a no-deal Brexit and the latest round of Brexit talks came to a close with little signs of progress being made. 

UK GDP Figures to Highlight Economic Impact of Lockdown 

Turning to next week’s session, its likely we could see the Pound come under significant pressure with the publication of the UK’s month GDP figures from April. 

This is expected to show the economy shrank by a whopping 24% in the first full month of the UK lockdown, and boding extremely poorly for the UK’s second quarter growth figures. 

On top of this we may also see lingering Brexit concerns also apply pressure to Sterling next week. 

Meanwhile, the Euro is likely to get off to a poor start next week, as Germany is expected to report a record drop in industrial production in April. 

EUR investors will also be keeping an eye on the Eurozone’s own GDP figures, with any upside in the single currency likely to be limited as the latest estimate looks set to confirm the bloc contracted 3.8% in the first quarter of 2020. 

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