Pound Euro exchange rate fluctuates amid renewed Brexit uncertainty

The Pound Euro exchange rate traded in a wide range again this week as fresh Brexit jitters infused volatility into the pairing. 

Pound rocked by Brexit jitters 

The Pound Euro exchange rate got off to a poor start this week, undermined by renewed Brexit uncertainty.  

This came as MPs voted to back the government’s controversial bill allowing it to unilaterally alter the Northern Ireland protocol. A move which many GBP investors fear could trigger a UK-EU trade war. 

Sterling then extended these losses into mid-week trade following comments by Bank of England (BoE) Governor Andrew Bailey. 

Speaking with other central bankers at the European Central Bank’s (ECB) Sintra forum, Bailey struck a notable dovish tone in contrast to his peers. Warning that inflation in the UK is likely to remain higher for longer than either the US or Eurozone. 

The GBP/EUR exchange rate then spiked to a two-week high on Thursday, but the Pound was unable to stabilise at its best levels, dipping again at the end of the week on the back of a weaker-than-expected UK manufacturing PMI. 

Meanwhile, the Euro was able to draw support at the start of the week thanks to some hawkish comments from ECB President Christine Lagarde as she opened the bank’s annual Sintra conference. 

While Lagarde maintained this hawkish tone at the Forum’s main panel on Wednesday, she was outdone by the Federal Reserve’s Jerome Powell, leading the EUR/GBP exchange rate to swiftly retreat from a two-week high. 

The single currency then faced fresh pressure in the latter half of the week amidst fresh concerns over European energy security, before ending the week on a positive as Eurozone inflation climbed to a new record high. 

Underwhelming German industrial data to weigh on the Euro? 

Looking ahead, the GBP/EUR exchange rate may strengthen next week as Germany’s latest industrial data is likely to paint a poor picture of the Eurozone’s largest economy. 

Factory orders are expected to have contracted again in May, while industrial production is forecast to have also slumped over the same period. 

The underwhelming figures may point to a slowing of German economic growth in the second quarter, which is unlikely to do much to ease fears over the risks of the Eurozone slipping into a recession. 

Meanwhile, with UK economic releases thin on the ground next week, we may see domestic politics act as the main catalyst of movement for the Pound. 

This could see Sterling falter if tensions between the UK and EU continue to mount. 

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