The Pound Euro (GBP/EUR) exchange rate struck its best levels in over a year this week, as Europe’s coronavirus situation continued to deteriorate.
Euro stumbles as Europe coronavirus cases surge
The Euro has spent much of the past week on the defensive, as concerns over the continued rise in coronavirus cases throughout Europe weighed heavily on the single currency.
Of particular concern for EUR investors was the situation in France, as the threat of its hospitals being overwhelmed forced President Macron into imposing a new four-week lockdown.
Also limiting the appeal of the Euro was the publication of the Eurozone’s latest consumer price index, which revealed that while headline inflation accelerated in March, core inflation unexpectedly slowed.
Meanwhile, the Pound got off to a solid start this week, after Sterling sentiment was bolstered by the UK government’s confidence that it is still on track to further ease lockdown restrictions in the coming weeks.
But the Pound failed to sustain its best levels, quickly retreating from its initial peak amidst concerns Europe’s coronavirus resurgence could still reach the UK.
Sterling began to climb again in mid-week trade however, with the GBP/EUR exchange rate refreshing a one-year high as UK GDP was revised higher in the last quarter of 2020.
Coronavirus headlines to remain in focus next week
Looking ahead to next week’s session, we suspect that coronavirus developments will continue to act as a key catalyst of movement in the Pound Euro exchange rate.
The euro will no doubt be particularly vulnerable to Covid headlines, with EUR exchange rates likely to sink further if more countries end up following France into lockdown.
Meanwhile, next week will see the UK government make a decision on whether to push ahead with plans to allow non-essential retail to begin reopening on 12 April. Assuming there are no sudden spikes in new cases it’s likely the government will give the go ahead, which may help propel the GBP/EUR exchange rate to new highs.
On the data front the spotlight for EUR investors will be on Germany’s latest industrial data, with the Euro potentially finding some support if factory orders and industrial production both print positively in February.
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