GBP Above €1.15 Amid Greenland Tensions

The Pound to Euro (GBP/EUR) exchange rate edged higher last week, climbing above €1.15 as renewed geopolitical tensions weighed on the single currency.

DAILY RECAP:

The Euro (EUR) struggled through the first half of last week, with the single currency coming under pressure amid renewed concerns over US territorial ambitions for Greenland.

Markets reacted nervously to comments from the White House suggesting military action could not be ruled out, rhetoric that was taken more seriously in Europe following President Donald Trump’s decision to authorise a raid in Caracas that resulted in the capture of Venezuelan President Nicolás Maduro.

EUR investors grew increasingly uneasy about what a potential US seizure of Greenland could mean for NATO cohesion and European security, weighing on sentiment toward the single currency.

Despite these concerns lingering, the Euro managed to claw back some losses later in the week. Support came from firmer-than-expected Eurozone inflation data and a surprisingly strong surge in German factory orders, which helped to ease fears over the bloc’s industrial outlook.

Meanwhile, the Pound (GBP) began the week on a positive footing, drawing support from comments by UK Prime Minister Keir Starmer hinting at closer alignment with the EU single market.

GBP investors welcomed the prospect that improved trade relations and a softening of Brexit-related frictions could help revive UK investment and growth.

However, Sterling struggled to build on these gains after December’s services PMI was revised lower, renewing doubts over the resilience of the UK economy.

With no further UK data to offset the disappointing PMI reading, GBP exchange rates traded largely sideways through the remainder of the week.

Near-Term GBP/EUR Forecast: Greenland Talks to Remain a Key Risk for the Euro?

Looking ahead, geopolitical developments are likely to remain a key driver of the Pound Euro exchange rate.

Markets will closely watch an upcoming meeting between the US and Denmark to discuss Greenland. If the talks fail to ease concerns or leave ambiguity over the island’s future status, the Euro could face renewed selling pressure.

For Sterling, attention turns to the UK’s latest GDP figures. Economists expect growth to have contracted for a third consecutive month in November.

Confirmation of a prolonged slowdown could weigh on the Pound by strengthening the hand of dovish policymakers within the Bank of England and reinforcing expectations for further interest rate cuts later this year.