Pound To Euro Forecast: GBP Strikes Near One-Month Best, Where Next?

The Pound Euro (GBP/EUR) exchange rate climbed to a near one-month high last week, as positive UK data and weak Eurozone data impacted the pairing.

At the time of writing, GBP/EUR was trading at €1.1535, up 0.4% on the week.

DAILY RECAP:

The Pound (GBP) was initially subdued last week as UK political jitters played on GBP investors’ minds. Prime Minister Keir Starmer faced fresh scrutiny as the scandal of his appointment of Peter Mandelson as US Ambassador continued.

Sterling then managed to march higher against the Euro (EUR), with a mixed jobs report and rather uneventful consumer price index offering GBP enough support to rise against EUR.

The Pound found further strength on Thursday after the UK’s preliminary PMIs for April exceeded forecasts, with GBP/EUR striking a near one-month high. However, the Pound quickly suffered some profit-taking and trimmed its gains.

Stronger-than-forecast UK retail sales data then provided the Pound with fresh support on Friday, helping it end the week higher.

The Euro was unfazed by a jump in German producer prices at the very start of the week.

The common currency then faced losses on Tuesday after Germany’s ZEW economic sentiment index slumped to its lowest level since December 2022, ringing alarm bells in the Eurozone’s largest economy.

The Eurozone’s consumer confidence index on Wednesday also showed its worst reading since December 2022, putting further pressure on the Euro.

More weak data hit EUR on Thursday, with the Eurozone’s preliminary PMIs showing an unexpected contraction in private sector activity in April, although the common currency was later able to attract some dip-buying and limit its losses.

GBP/EUR Forecast: BoE and ECB Decisions in Focus

Looking to the days ahead, the primary event for GBP investors will be the Bank of England’s (BoE) upcoming interest rate decision. Markets largely anticipate that the central bank will hold rates steady, as officials assess the potential duration of the US-Iran conflict and its broader implications for the UK economy.

That said, the Pound could find some upward momentum if policymakers signal a willingness to raise rates.

Meanwhile, Thursday brings the Eurozone’s preliminary GDP growth rate for the first quarter, inflation rate for April, and the European Central Bank’s (ECB) own interest rate decision.

Stalling growth in the first quarter could undermine EUR and deter the ECB from raising rates, even if inflation accelerated in April. However, any hawkish forward guidance from the ECB could lend EUR support.