The Pound Euro (GBP/EUR) exchange rate made steady gains this week, as markets welcomed a surprise drop in new UK coronavirus cases.
Pound rallies on upbeat coronavirus statistics
The Pound trended broadly higher this week as GBP investors seized on some positive UK coronavirus statistics, which reported that new cases fell for seven consecutive days.
While cases have subsequently started to creep higher again, the drop has led to one health expert suggesting that the pandemic in the UK ‘could largely be over’ but the end of October.
Also bolstering Sterling sentiment this week was the announcement that the EU has chosen to suspend legal action against the UK for its breaches of the Northern Ireland protocol in an attempt to ease tensions as the two sides attempt to find a workable solution.
At the same time, while the Euro struggled to hold its ground against the Pound, it was able to trend higher against the majority of its other peers.
This was largely attributed to a pullback in the US Dollar this week, with the strong negative correlation between the world’s most traded currency pairing, buoying EUR demand.
Aiding the single currency and helping to limit the upside in the GBP/EUR exchange rate were some positive EUR data releases in the latter half of the week, including the Eurozone’s latest GDP figures, which reported a larger-than-expected rebound in economic growth in the second quarter.
BoE rate decision in focus next week
Top of the agenda next week will no doubt be the Bank of England (BoE), as the UK central bank concludes its latest policy meeting.
Economists aren’t expecting any policy changes from the BoE next month, so the focus will primarily be on the bank’s forward guidance.
This could result in the Pound weakening next week as the BoE is expected to maintain its dovish stance and avoid any discussions regarding the potential tapering of its quantitative easing programme.
Meanwhile, there will be a number of Eurozone data releases that are likely to influence the Euro next week, but perhaps the most impactful will be Germany’s latest factory order figures.
This could see the single currency face some headwinds towards the end of next week, if another German industrial release disappoints.