GBP/EUR: Pound Steady vs. Euro As Brexit Headlines Dominate
  • Pound (GBP) pound rises after a weekly loss
  • UK inflation due later in the week
  • Euro (EUR) under pressure on economic outlook
  • ECB rate decision is due later in the week

The Pound Euro (GBP/EUR) exchange rate is rising at the start of the week, rebounding from losses last week. The pair fell -0.52% across the previous week, settling on Friday at €1.1756, after trading in a range between €1.1740 – €1.1903. At 05:45 UTC, GBP/EUR trades +0.29% at €1.1781.

The pound came under pressure last week amid continued political instability exacerbating the deteriorating economic outlook for the UK. The Conservatives have reduced the number of candidates in the leadership race to six, including ex-finance minister Rishi Sunak, Foreign Secretary Liz Truss and the less known Penny Mordaunt.

While other candidates are pushing for tax cuts and Rishi Sunak has made clear that reining in inflation in his priority, which would help all families.

Brexit woes have also weighed on the pound and will remain in focus as the Northern Ireland protocol bill is due to be passed in parliament this week. The bill essentially rips up the post-Brexit agreement and the EU has threatened to take legal action if necessary.

Looking ahead this week is a busy week on the UK economic calendar with inflation data, unemployment data and UK retail sales all due.

The euro trades higher versus the pound but tumbled versus the US Dollar last week as recession fears continue to mount and as the outlook deteriorates.

Last week the European Commission downgraded the growth forecasts for the eurozone to 2.6% from 2.7% while inflation was upwardly revised to 7.6% from a previously expected 6.1%.

The likelihood of a recession in Europe is rising by the day. Energy security fears are growing as Russia threatens to cut off the gas supply to the region, which would accelerate the move into a recession.

Looking ahead the key event this week for the euro is the European Central Bank monetary policy decision, where the central bank is expected to start raising interest rates. The broad expectation is that the ECB will raise by 25 basis points. However with inflation expected to rise to another record high, pressure is building for a large hike.