Pound To Euro Week Ahead Forecast: UK GDP In Focus

The Pound Euro (GBP/EUR) exchange rate was choppy last week, initially weakening before rebounding as markets reacted to the announcement of a US-Iran ceasefire.

WEEKLY RECAP:

The Pound (GBP) started the week on a subdued footing amid thin trading conditions over the Easter bank holiday and softer UK services PMI data.

The final PMI reading confirmed that activity slowed to its weakest level in 11 months, while a risk-off mood added further pressure on Sterling.

Midweek, GBP recovered against safer currencies following the announcement of a US-Iran ceasefire, which improved global risk sentiment and reduced fears of a major escalation.

However, the Pound’s gains proved short-lived.

A lack of UK economic data and lingering uncertainty over the durability of the ceasefire limited further upside and left Sterling trading cautiously.

Meanwhile, the Euro (EUR) also experienced mixed performance.

The single currency initially found support after Eurozone PMI data showed a sharp rise in input price pressures, prompting markets to increase expectations for further European Central Bank rate hikes.

However, the ceasefire and resulting drop in energy prices led investors to scale back expectations for near-term tightening, weighing on EUR.

Additional soft economic data from the Eurozone further limited the Euro’s appeal.

While EUR was able to recover some ground due to its inverse relationship with the US Dollar, gains were capped by mixed German data.

GBP/EUR Exchange Rate Forecast: UK GDP to Undermine the Pound?

Looking ahead, developments in the Middle East are likely to remain a key driver of GBP/EUR.

Shifts in sentiment regarding the stability of the ceasefire could lead to renewed volatility in the pairing.

On the data front, markets will monitor commentary from Bank of England officials for signals on the policy outlook.

Attention will also turn to the UK’s latest GDP figures.

A modest growth reading could reinforce concerns about the resilience of the UK economy and weigh on Sterling.

For the Euro, a potential recovery in Eurozone industrial production may offer some support, although broader market trends are likely to remain the dominant influence.