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Pound to Euro Exchange Rate Struggles to Hold Ground as Bank of England Bets Cloud Outlook

Pound to Euro Exchange Rate Outlook Lower Ahead of Major Data This Week

Despite a poor week for UK data and Bank of England (BoE) interest rate cut bets, the Pound Sterling to Euro (GBP/EUR) exchange ultimately avoided major losses last week. This was due partially to weakness in the Euro (EUR).

After opening last week at the level of 1.1750, GBP/EUR spent most of the week trending lower. GBP/EUR briefly touched on a January low of 1.1638 before recovering in the second half of the week.

GBP/EUR closed last week slightly lower, in the region of 1.1735. When markets opened this week though, BoE interest rate cut bets hit the Pound (GBP) again and GBP/EUR was trending closer to the level of 1.1700 at the time of writing.

As the Euro has a negative correlation with its rival, the US Dollar (USD), the shared currency is recovering slightly today.

Pound (GBP) Exchange Rates Slide on Bank of England (BoE) and Brexit Speculation

The Pound was able to avoid notable losses last week, despite rising Bank of England (BoE) interest rate cut bets.

This was largely due to weakness in Pound rivals, like the Euro. Investors were also hesitant to sell the Pound too much amid hopes that the current phase of the Brexit process was going smoothly.

However, uncertainty over Brexit and a possible soft Brexit outcome persist. Fresh concerns about Britain’s future relationship with the EU weakened Sterling today.

Over the weekend, UK Finance Minister Sajid Javid admitted that businesses would be hit by the Brexit process. He said that the UK would not remain aligned with the EU and would leave the single market and customs union.

This news, as well as bets that there was a 70% chance of a January rate cut from the BoE, caused modest Pound losses today.

Euro (EUR) Exchange Rates Lack Drive as Eurozone Data Largely Unsurprising

The Euro was unable to sustain gains against the Pound last week as it lacked much solid support.

Recent Eurozone data has been decent but largely unsurprising. Friday’s Eurozone inflation rate data showed inflation edging higher in December as expected.

However, the day’s Eurozone construction data and this morning’s German PPI data both fell slightly short of forecasts, keeping investors hesitant to be too optimistic about Eurozone recovery hopes.

As a result, the Euro continues to be driven more by strength in rivals.

At the end of last week the Euro was weighed as some stronger than expected US data boosted its rival, the US Dollar. As the US Dollar fell back slightly today, the Euro steadied.

Pound to Euro (GBP/EUR) Exchange Rate Investors Anticipating Major Ecostats

While today’s economic calendar was fairly quiet, there are many major datasets and other influential events expected over the coming week that could cause notable Pound and Euro movement.

Tomorrow will see the publication of Britain’s latest key job market results, as well as ZEW’s German and Eurozone economic sentiment report.

The latter half of the week may be even more influential however, with the European Central Bank (ECB) policy decision on Thursday and key PMI projections on Friday.

Investors will be paying close attention to the ECB policy decision and following press conference for any signs of a shift in tone on the bank’s outlook.

Friday’s PMIs, which will see projections from both Britain and the Eurozone, will give markets a better idea of how economies performed this month.

Bank of England (BoE) interest rate cut bets could soften if upcoming UK PMI data beats forecasts, which would give the Pound to Euro (GBP/EUR) exchange rate a more solid boost.