GBP/EUR Exchange Rate Nosedives to €1.10 as BoE Expands Stimulus

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The Pound to Euro (GBP/EUR) exchange rate slumped to a three-week low this week in the wake of the Bank of England’s (BoE) latest rate decision.

Pound Tumbles in Wake of BoE Rate Decision

The Pound fell sharply against the Euro and majority of its other peers this week after the BoE concluded its latest policy meeting, announcing that it would be expanding its quantitative easing programme but slowing the pace of purchases.

However, Sterling fared much better in the first half of the week, with GBP/EUR even making some tentative gains in response to some Brexit optimism from Boris Johnson, with the PM going so far as to suggest a trade deal could be reached in July with a ‘bit of oomph’.

On the data front things were a bit more of a mixed bag, with the weak employment figures and slowing inflation being offset by a sharp rebound in UK retail sales last month.

The Euro, meanwhile, got off to a poor start this week, with a sharp fall in the Eurozone’s latest trade surplus appearing to limit the appeal of the single currency despite an improvement in economic sentiment.

While the Euro was quick to rally against a weakened Pound in the latter half of the week , these gains were also tempered ahead of a virtual EU summit, in which EU leaders will debate the terms of a €750bn coronavirus recovery fund.

UK and Eurozone PMIs In Spotlight

Looking ahead to next week, the focus looks to be on the latest PMI estimates from both the UK and Eurozone.

In the UK economists are forecasting the manufacturing sector may have almost have returned to growth in June while the service sector will have witnessed a far more modest improvement in activity given most shops didn’t reopen until the 15th.

Across the channel, factory activity in the Eurozone is expected to have shown a slower pace of recovery, but analysts are predicting a stronger rebound in the service sector given the considerable steps taken by countries in the bloc to reopen their economies.

On top of this GBP investors are also likely keep an ear out for any Brexit related developments, with the Pound potentially rising if all parties remain optimism on the chances for a deal.

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