The Pound to Euro (GBP/EUR) exchange rate bounced back from a three-month low this week as the increasingly risk-sensitive Sterling was buoyed by some market optimism.
Pound Shrugs Off Brexit Concerns to Strengthen in Upbeat Trade
The Pound got off to a poor start this week, with the GBP/EUR exchange rate falling to a three-month low in response to renewed Brexit jitters as the UK and EU kicked off a month of ‘insensitive’ trade talks.
Sterling quickly began to recoup these losses however, with the currency bouncing back on Tuesday in response to Boris Johnson’s ‘ambitious’ plan for a post-coronavirus recovery, as well as a correction in currency markets amid end of quarter flows.
The Pound then extended this upside into the second half of the week as the increasingly risk-sensitive currency was bolstered by a bout of market optimism, on the back of positive headlines regarding a possible coronavirus vaccine.
The Euro, meanwhile, opened this week’s session on strong footing, strengthening as Eurozone economic sentiment and inflation both improved in June, as more of the bloc emerged from lockdown.
While this upbeat data carried through into the remainder of the week, with upwardly revised PMI figures and stronger-than-expected employment figures, this failed to prop up the Euro as the upbeat mood saw investors flock to riskier assets
German Industrial Data in Focus
Looking ahead to next week, the GBP/EUR exchange rate, could come under some pressure through the first half of the session with the publication of Germany’s latest industrial data.
Both factory orders and industrial production are forecast to have rebounded strongly in May, with the recovery of a vital part of the Eurozone’s largest economy likely to cheer EUR investors.
Meanwhile, the Pound could receive a boost at the start of the week if the UK’s construction PMI reports a notable improvement in construction activity last month.
However, the real focus for GBP investors is likely to remain on Brexit as trade talks between the UK and EU continue in London next week.
Will the two sides be able to reach some kind of break through or will a worrying lack of progress put pressure on the Pound again next week?
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